A mortgage file is paused during a lock-desk handoff because of FCRA Credit Report Rights. Which answer should decide how the file should be documented?
Correct Answer
D) Keep consumer-report information within authorized use
Why this is correct: The Fair Credit Reporting Act (FCRA), implemented by Regulation V, governs the use of consumer credit reports. A fundamental requirement is that a user must have a "permissible purpose" (such as for a credit transaction) to obtain a report and must use the information only for authorized purposes. Therefore, the correct way to document the file is to ensure that any consumer report information is obtained and used only within the scope of an authorized purpose, such as for making a legitimate credit decision. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because internal policies cannot override FCRA's federal requirements for permissible purpose and proper use. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because FCRA compliance is mandatory at the time the credit report is pulled and used. "Rely on oral agreement when the rule requires documented compliance" is wrong because FCRA requirements, including certifications of permissible purpose, must be documented. Exam tip: For FCRA, always establish and document a permissible purpose (like a credit transaction) before pulling a credit report.
Why This Is the Correct Answer
The correct response is "Keep consumer-report information within authorized use" because Consumer reports require a permissible purpose and proper FCRA/Reg V handling.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option B: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option C: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
FCRA credit-reporting rules: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to FCRA credit-reporting rules; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
More Federal Laws Questions
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