Privacy, Credit Reporting, AML & Other Federal Law: practice questions

Where did the Dodd-Frank Act establish the Consumer Financial Protection Bureau?

1. Inside the Department of the Treasury, as a new office
2. Inside HUD, replacing its old RESPA enforcement office
3. In the Federal Reserve System ✓
4. As a division of the Federal Trade Commission

Why: 12 U.S.C. 5491(a) establishes "in the Federal Reserve System, an independent bureau" known as the Bureau of Consumer Financial Protection, to regulate the offering and provision of consumer financial products and services under the Federal consumer financial laws.

Source: 12 U.S.C. 5491(a)

Which of these gives the CFPB supervisory authority over a non-bank mortgage broker, whatever its size?

1. It is a larger participant in a market defined by a later CFPB rule only
2. It originates or brokers consumer loans secured by real estate ✓
3. It holds total assets of more than $10 billion, with its affiliates
4. It has received a referral from a state regulator after an examination

Why: 12 U.S.C. 5514(a)(1)(A) applies the CFPB's supervision of nondepository covered persons to any covered person who "offers or provides origination, brokerage, or servicing of loans secured by real estate for use by consumers primarily for personal, family, or household purposes". No size test applies to mortgage originators; the $10 billion test in 5515 is for banks and credit unions.

Source: 12 U.S.C. 5514(a)(1)(A)

A consumer who suspects she is about to become a victim of identity theft asks a nationwide credit bureau for an initial fraud alert. How long must the alert stay in her file?

1. At least 90 days, then renewable by further request
2. At least 1 year, unless she asks to remove it sooner ✓
3. 7 years, running from the date she first asked for it
4. Until the next time any lender pulls her credit report

Why: 15 U.S.C. 1681c-1(a)(1)(A) requires the agency to include a fraud alert for not less than 1 year from the request, unless the consumer asks for earlier removal, and to refer the alert to the other nationwide agencies. The 7-year alert is the extended alert available with an identity theft report (1681c-1(b)).

Source: 15 U.S.C. 1681c-1(a)

What does 12 U.S.C. 5511 give as the CFPB's purpose?

1. Setting interest rates for all consumer mortgage loans
2. Insuring deposits at banks and credit unions nationwide
3. Licensing every mortgage loan originator in each of the states
4. Consumer access to fair, transparent, competitive markets ✓

Why: 12 U.S.C. 5511(a) directs the Bureau to implement and enforce Federal consumer financial law consistently "for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets ... are fair, transparent, and competitive". States license originators under the SAFE Act.

Source: 12 U.S.C. 5511(a)

Above what asset size does the CFPB have exclusive authority to examine an insured bank for compliance with federal consumer financial law?

1. $1 billion
2. $50 billion
3. $10 billion ✓
4. $250 million

Why: 12 U.S.C. 5515(a) applies to "an insured depository institution with total assets of more than $10,000,000,000 and any affiliate thereof" ($10 billion), and 5515(b)(1) gives the Bureau "exclusive authority to require reports and conduct examinations" of those institutions.

Source: 12 U.S.C. 5515(a)-(b)

A lender denies credit based partly on information in a consumer report. Which of these must its notice under the FCRA include?

1. A copy of the underwriter's notes explaining the credit decision
2. A statement that the agency did not decide and cannot give reasons ✓
3. The agency's reasons for the denial, exactly as the agency stated them
4. The names of any other lenders that pulled the report this year

Why: 15 U.S.C. 1681m(a) requires notice of the adverse action, disclosure of any numerical credit score used, the name, address and telephone number of the agency, "a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons", and notice of the right to a free report and to dispute.

Source: 15 U.S.C. 1681m(a)

On a fixed-rate loan, when may a borrower who is current and has a good payment history ask to cancel private mortgage insurance under the Homeowners Protection Act?

1. When the balance reaches 78% of original value
2. When the balance reaches 90% of original value
3. Only at the midpoint of the loan's amortization
4. When the balance reaches 80% of original value ✓

Why: Under 12 U.S.C. 4902(a) PMI is cancelled on the cancellation date if the borrower requests it in writing, has a good payment history, is current and meets the holder's value and no-subordinate-lien requirements. 12 U.S.C. 4901(2) sets the cancellation date for a fixed-rate loan when the balance first reaches (or is scheduled to reach) 80 percent of original value.

Source: 12 U.S.C. 4901(2), 4902(a)

Who must approve a creditor's initial written Identity Theft Prevention Program under the Red Flags Rule?

1. The board of directors or an appropriate board committee ✓
2. The Federal Trade Commission, before the program may take effect
3. The creditor's outside auditor, after a full review
4. Each state regulator where the creditor is licensed

Why: 16 CFR 681.1(e)(1) requires the creditor to obtain approval of the initial written Program from either its board of directors or an appropriate committee of the board (or, with no board, a designated senior employee).

Source: 16 CFR 681.1(e)(1)