ECOA & Regulation B: practice questions

A loan officer asks a married applicant whether the couple plan to have children soon. What does Regulation B say?

1. It is allowed if asked of every married applicant
2. It is allowed to predict a possible loss of income
3. It is prohibited to ask about plans to bear children ✓
4. It is prohibited only if the answer is written down

Why: 12 CFR 1002.5(d)(3) forbids inquiring about birth control practices, intentions concerning the bearing or rearing of children, or capability to bear children. The creditor may ask the number and ages of dependents and about dependent-related obligations, asked without regard to sex or marital status. Section 1002.6(b)(3) also bars assuming a category of persons will have reduced income because of childbearing.

Source: 12 CFR 1002.5(d)(3), 1002.6(b)(3)

A creditor uses an empirically derived, statistically sound credit scoring system that includes age as a variable. What limit does Regulation B place on how age is used?

1. Age may be used only for applicants under the age of 62
2. Age may be used only if the applicant gives written consent
3. Age may not be used at all in any credit scoring system
4. An elderly applicant's age may not be scored negatively ✓

Why: 12 CFR 1002.6(b)(2)(ii) permits such a system to use age as a predictive variable "provided that the age of an elderly applicant is not assigned a negative factor or value", mirroring 15 U.S.C. 1691(b)(3). Any system may use an elderly applicant's age to favor the applicant (1002.6(b)(2)(iv)).

Source: 12 CFR 1002.6(b)(2)(ii); 15 U.S.C. 1691(b)(3)

By when must a creditor tell a first-lien mortgage applicant of the right to receive copies of the appraisals?

1. By the day the appraisal is ordered by the lender
2. By the third business day after the application ✓
3. At least 3 business days before the loan closes
4. Within 30 days after it receives the application

Why: 12 CFR 1002.14(a)(2) requires the creditor to mail or deliver a written notice of the right to receive a copy of all written appraisals not later than the third business day after it receives an application for credit to be secured by a first lien on a dwelling.

Source: 12 CFR 1002.14(a)(2)

An applicant asks for a $400,000 loan. The creditor offers $360,000 instead and the applicant expressly accepts. Has adverse action occurred under Regulation B?

1. Yes; any refusal of the full amount is adverse action
2. No; an accepted counteroffer is not adverse action ✓
3. Yes, because the offer was at least 10% smaller
4. No, but only if the rate on offer was also lower

Why: 12 CFR 1002.2(c)(1)(i) defines adverse action as a refusal to grant credit in substantially the amount or on substantially the terms requested "unless the creditor makes a counteroffer ... and the applicant uses or expressly accepts the credit offered". Express acceptance takes this case out of the definition.

Source: 12 CFR 1002.2(c)(1)(i)

An applicant applying alone submits a financial statement that lists assets she owns jointly with her sister. How must the creditor treat the application?

1. As a joint application with the sister as well
2. As an individual application, not a joint one ✓
3. As incomplete until the sister also applies
4. As one requiring the sister's signed consent

Why: 12 CFR 1002.7(d)(1) states that a creditor "shall not deem the submission of a joint financial statement or other evidence of jointly held assets as an application for joint credit". Whether the sister's signature is needed on any document is a separate question governed by 1002.7(d)(2) to (4).

Source: 12 CFR 1002.7(d)(1)