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Before the team acts on a supervisory file review, the file reviewer must address ECOA Income Consideration. Which response is most defensible?

Correct Answer

A) Evaluate credit without prohibited-basis discrimination

Why this is correct: The Equal Credit Opportunity Act (ECOA) and its implementing Regulation B prohibit discrimination in any aspect of a credit transaction based on a prohibited basis such as race, color, religion, national origin, sex, marital status, age, or income from public assistance. A creditor must evaluate credit applications based on the applicant's actual creditworthiness, not on prohibited factors. The correct answer, "Evaluate credit without prohibited-basis discrimination," is the central mandate of ECOA, as supported by the original explanation. 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 create exceptions to federal anti-discrimination law. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because ECOA compliance is mandatory from the point of application; waiting for a regulator is not a defense. "Rely on oral agreement when the rule requires documented compliance" is wrong because ECOA has specific requirements for written notices (like adverse action notices) and providing copies of appraisals; oral agreements do not fulfill these documentation duties. Exam tip: Remember that ECOA's core purpose is to prevent discrimination. Any answer choice that allows for differential treatment based on a protected characteristic is incorrect.

Answer Options
A
Evaluate credit without prohibited-basis discrimination
B
Use an internal exception instead of the required federal disclosure or timing rule.
C
Wait until a regulator asks for the file before applying the federal requirement.
D
Rely on oral agreement when the rule requires documented compliance.

Why This Is the Correct Answer

The correct response is "Evaluate credit without prohibited-basis discrimination" because ECOA/Regulation B prohibits discrimination and requires action notices and valuation copies.

Why the Other Options Are Wrong

Option B: 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 C: 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 D: 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

ECOA and Regulation B: 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 ECOA and Regulation B; 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
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