ECOA's purpose, the prohibited bases, and what a creditor may do

Question 1

Which statement best describes ECOA's central purpose?

Accepted Answer

To prohibit discrimination on specified bases throughout a credit transaction

Answer

To standardize interest rates for applicants with different credit histories

Answer

To require approval when an applicant offers sufficient collateral

Answer

To regulate discrimination at the final underwriting decision alone

Question 2

Which set contains three bases expressly prohibited by ECOA?

Accepted Answer

Religion, marital status, and national origin

Answer

Marital status, familial status, and religion

Answer

National origin, disability status, and sex

Answer

Race, color, and residence in a low-income area

Question 3

An applicant can enter a binding contract. A lender rejects the application solely because the applicant is 23 and the lender prefers borrowers over 30. Which conclusion is correct?

Accepted Answer

The rejection improperly uses age as a prohibited basis

Answer

The rejection is permitted because elderly status begins at 62

Answer

The rejection is permitted if the lender uses the same minimum age for all applicants

Answer

The rejection is permitted if the lender discloses the age policy in advance

Question 4

One quarter of an applicant's income comes from public assistance. The remainder is wages. How does ECOA treat the public assistance portion?

Accepted Answer

It protects against discrimination because any part of income comes from public assistance

Answer

It protects the applicant only if public assistance exceeds half of total income

Answer

It protects the applicant only if public assistance is the sole income source

Answer

It permits exclusion of that portion merely because wages are also available

Question 5

A lender adds a fee because an applicant previously exercised a right under the Consumer Credit Protection Act in good faith. What is the ECOA issue?

Accepted Answer

The fee imposes less favorable treatment for a protected exercise of rights

Answer

There is no issue because the application was approved

Answer

The fee is permitted if it equals the lender's cost of handling the earlier matter

Answer

The protection applies to public assistance recipients rather than other applicants

Question 6

For purposes of Regulation B, what does good faith mean?

Accepted Answer

Honesty in fact in the conduct or transaction

Answer

Observance of reasonable commercial standards of fair dealing

Answer

A reasonable belief that the asserted claim will succeed

Answer

An absence of any intent to delay or avoid repayment

Question 7

A creditor uses harsher collection procedures for borrowers of one religion than for otherwise comparable borrowers. The loans were originated on equal terms. What is the best assessment?

Accepted Answer

The collection practices violate the prohibition on religious discrimination in credit

Answer

Equal terms at origination satisfy ECOA for these loans

Answer

ECOA would apply if the borrowers requested additional credit

Answer

Collection falls outside a credit transaction after funds are disbursed

Question 8

During an initial call, an MLO says people of the caller's national origin receive worse rates. No application is submitted. Which rule most directly addresses this statement?

Accepted Answer

The prohibition against discouraging prospective applicants on a prohibited basis

Answer

The requirement for a completed application before an action notice

Answer

The general ban on discriminating against an applicant in any aspect of a credit transaction

Answer

The rule limiting when a creditor may ask about national origin on an application

Question 9

A mortgage broker regularly selects lenders for prospective applicants but never makes the final approval decision. Is the broker covered by Regulation B's discrimination and discouragement rules?

Accepted Answer

Yes, because regular referral or selection activity is included for these rules

Answer

No, because final approval is made by another entity

Answer

No, unless the broker also holds the loan after closing

Answer

Yes, but only after the selected lender denies the application

Question 10

Which purpose can support a permitted inquiry into marital status under ECOA?

Accepted Answer

Ascertaining the creditor's rights and remedies for the particular extension of credit

Answer

Estimating repayment willingness from whether an applicant is married

Answer

Measuring how stable the applicant's household income is likely to remain over the loan term

Answer

Predicting whether the applicant's income is likely to continue after a future divorce

Question 11

An underwriter asks about public assistance to document its amount and probable continuance under applicable regulatory requirements. What is the best assessment?

Accepted Answer

The inquiry can be permitted because it serves a legitimate creditworthiness purpose

Answer

The inquiry is prohibited because public assistance may never be discussed

Answer

The inquiry is permitted only after the applicant volunteers that income comes from assistance

Answer

The inquiry is permitted only if the applicant has no employment income

Question 12

Regulation B defines an elderly applicant as a person of what age?

Accepted Answer

62 or older

Answer

55 or older

Answer

60 or older

Answer

65 or older

Question 13

A qualifying, statistically sound credit scoring system considers age. Which restriction applies to an elderly applicant?

Accepted Answer

The applicant's age may not be assigned a negative factor or value

Answer

The applicant's age must be treated as missing information

Answer

The applicant must receive the same total score as every younger applicant

Answer

The applicant's age may be penalized if the lender discloses the penalty

Question 14

A lender proposes considering a 68-year-old applicant's age to extend credit on terms more favorable to that applicant. How does ECOA address this use of age?

Accepted Answer

It permits considering an elderly applicant's age in that applicant's favor

Answer

It permits asking the applicant's age but not using the answer to set the terms

Answer

It permits favorable age treatment only for applicants who are also retired

Answer

It prohibits favorable age treatment unless every applicant receives identical terms

Question 15

An examiner compares two lenders. One evaluates verified income amount and expected continuance under applicable rules. The other rejects applicants whenever any income is public assistance. What is the controlling distinction?

Accepted Answer

Evaluation of legitimate income characteristics versus rejection because of a protected income source

Answer

Whether the second lender records the same rejection reason for every applicant who receives assistance

Answer

Whether public assistance represents most of the applicant's income

Answer

Whether public assistance income can be verified as reliably as wages from an employer

Question 16

An MLO tells a coworker, 'We approve applicants of every race, so ECOA allows us to charge one race a higher rate.' What is the best correction?

Accepted Answer

ECOA also prohibits discrimination in credit terms, including pricing

Answer

The pricing difference is acceptable if no applicant is denied

Answer

The pricing difference is acceptable when described in the disclosures

Answer

ECOA concerns collection practices rather than origination pricing

Question 17

A lender's advertisement uses a video to communicate that applicants of a particular religion will receive worse terms. The lender argues that no printed sentence says this. Which response is correct?

Accepted Answer

Visual images, including videos, can be statements under the discouragement rule

Answer

The rule requires an express printed statement of the discriminatory policy

Answer

The rule applies to videos after a viewer submits an application

Answer

Advertising is outside the rule if the lender uses nondiscriminatory application forms

Question 18

Which standard governs whether a creditor's statement is prohibited discouragement?

Accepted Answer

Whether the creditor knows or should know a reasonable person would understand that a prohibited basis would lead to denial or less favorable terms

Answer

Whether the creditor admits intending to reject the listener

Answer

Whether the listener later receives a formal denial

Answer

Whether a completed application was pending when the statement was made

Question 19

A lender adds extra investigation steps solely for applicants of one race, although it ultimately approves them on ordinary terms. Which conclusion follows?

Accepted Answer

Race-based differences in investigation procedures can violate ECOA

Answer

Approval eliminates the discriminatory effect of the investigation

Answer

The extra steps are permitted if they do not change the interest rate

Answer

ECOA applies to the investigation only if public assistance income is involved

Question 20

A creditor properly obtains marital-status information to determine rights and remedies. It then lowers the applicant's score because the applicant is separated. What is the best analysis?

Accepted Answer

The authorized inquiry does not permit discriminatory use of the answer

Answer

A permitted inquiry authorizes later use in any credit decision

Answer

Separated status is outside ECOA's marital-status protection

Answer

The lower score is acceptable if the applicant still qualifies

Question 21

Which statement about ECOA's protection based on age is accurate?

Accepted Answer

It includes the condition that the applicant has capacity to contract

Answer

It begins when an applicant reaches age 62

Answer

It requires lenders to disregard whether an applicant can enter a binding contract

Answer

It applies when retirement income exceeds employment income

Question 22

A lender denies a request because documented repayment capacity fails a legitimate standard applied without prohibited discrimination. The applicant argues that ECOA requires approval. Which response is best?

Accepted Answer

ECOA prohibits discriminatory treatment but allows legitimate creditworthiness evaluation

Answer

ECOA requires approval if the applicant belongs to a protected group

Answer

ECOA allows the denial only when no collateral is offered

Answer

ECOA requires a written explanation of the denial but does not address how applicants are evaluated

Question 23

Which regulation implements the Equal Credit Opportunity Act?

Accepted Answer

Regulation B

Answer

Regulation C

Answer

Regulation X

Answer

Regulation Z

Question 24

Which change to a lender's policy best addresses an ECOA problem?

Accepted Answer

Replace a public-assistance exclusion with lawful evaluation of income amount and probable continuance

Answer

Move national-origin pricing into a disclosed adjustment every borrower can read before applying

Answer

Replace the written religious eligibility rule with loan officer discretion exercised orally on each file

Answer

Apply the marital-status score adjustment uniformly so that no loan officer can make exceptions

Question 25

Two otherwise comparable applicants receive different rates solely because of skin color, although they identify with the same race. Which ECOA statement applies?

Accepted Answer

Color is itself an expressly prohibited basis

Answer

Color matters under ECOA only when the applicants identify with different races

Answer

Color-based pricing is permitted if both applicants receive approval

Answer

Color-based pricing is permitted if national origin is the same

Question 26

An applicant meets the same credit criteria as comparable applicants but is offered a smaller loan solely because of sex. Which analysis is correct?

Accepted Answer

The reduced amount is less favorable credit treatment on a prohibited basis

Answer

A smaller offer avoids ECOA because some credit remains available

Answer

The offer is permitted if the interest rate is unchanged

Answer

The offer is permitted if the lender states the reason accurately

Question 27

An MLO tells unmarried callers they should apply elsewhere because this lender favors married borrowers. The lender says it never receives applications from those callers. What is the best assessment?

Accepted Answer

The message can violate the discouragement rule before an application is submitted

Answer

The absence of applications establishes that ECOA does not apply

Answer

Referring callers elsewhere makes a marital-status preference permissible

Answer

The statement is permitted because it concerns preference rather than a guaranteed denial

Question 28

A creditor uses a separate, harsher review standard for applicants of one religion. It claims its employees apply that standard consistently. What is the flaw in this defense?

Accepted Answer

Consistent use of a religion-based disadvantage does not remove prohibited discrimination

Answer

The creditor must also show that the harsher standard predicts repayment for that group

Answer

The defense would succeed, but only if the standard appears in a written and approved policy

Answer

The defense fails only if employees actually applied the standard inconsistently from file to file

Question 29

Which description best captures what it means to discriminate against an applicant under Regulation B?

Accepted Answer

To treat an applicant less favorably than other applicants

Answer

To treat applicants differently, whether or not the treatment is less favorable

Answer

To deny credit to any applicant who belongs to a protected group

Answer

To issue a denial after receiving a completed application

Question 30

A lender wants to ask about an applicant's age to evaluate a pertinent element of creditworthiness under applicable regulations. Which statement is accurate?

Accepted Answer

ECOA permits limited age inquiries for authorized creditworthiness purposes

Answer

ECOA permits age inquiries only when the age is used in an elderly applicant's favor

Answer

ECOA permits age inquiries only inside a demonstrably and statistically sound scoring system

Answer

ECOA permits age inquiries only to confirm the applicant can enter a binding contract

Question 31

A scoring system is otherwise qualifying and statistically sound. It assigns an elderly applicant a negative age factor. The lender cites the system's statistical soundness as its defense. What is the best response?

Accepted Answer

Statistical soundness does not remove the express restriction on negative age factors for elderly applicants

Answer

Statistical soundness permits any age factor the model produces

Answer

The factor is permissible if applied to applicants beginning at age 65

Answer

The factor is permissible if the applicant receives the score before closing

Question 32

A lender increases the price of an existing credit arrangement solely because the borrower changes religion. Which statement is correct?

Accepted Answer

Existing credit is covered, so religion cannot justify less favorable terms

Answer

ECOA protects applicants seeking new credit rather than existing borrowers

Answer

Existing credit is covered only when the borrower has applied to modify the credit terms

Answer

Existing credit is covered for collection practices, but later price changes are contract matters

Question 33

An applicant honestly exercises a Consumer Credit Protection Act right but does not obtain the requested relief. A lender penalizes the applicant because of that exercise of rights. Which analysis is best?

Accepted Answer

Good faith concerns honesty in fact, so an unsuccessful outcome does not itself remove the protection

Answer

The protection depends on obtaining the requested relief

Answer

The penalty is permissible if the earlier matter is closed

Answer

The protection depends on the lender having approved the exercise of rights

Question 34

A compliance trainer lists race, color, religion, national origin, sex, marital status, and age with capacity to contract. Which addition completes the major prohibited-basis categories in ECOA?

Accepted Answer

Public assistance income and good-faith exercise of Consumer Credit Protection Act rights

Answer

Familial status and disability, as those terms are used in the Fair Housing Act

Answer

Receipt of any government benefit and the exercise of any legal right against any creditor

Answer

Occupation and the source of employment income, including part-time or seasonal work

Question 35

Which pair correctly matches a practice with its ECOA treatment?

Accepted Answer

Considering an elderly applicant's age in that applicant's favor: expressly permitted

Answer

A marital-status inquiry to determine rights and remedies: prohibited in all cases

Answer

Rejecting public assistance income because of its source: permitted when wages are also present

Answer

Discouraging a prospective applicant because of religion: permitted before application

Question 36

A lender lawfully asks about income continuance. Its file shows the decision was actually based on a policy against lending to people of a particular national origin. What matters most?

Accepted Answer

The actual national-origin basis remains prohibited despite the lawful inquiry

Answer

The lawful income question makes the resulting decision permissible

Answer

The decision is permissible if the income analysis alone would have supported the same denial

Answer

The lawful inquiry controls unless the applicant can show the income question itself was a pretext

Question 37

A broker regularly refers prospective applicants to lenders. The broker sends applicants of one religion to a costlier lender solely because of religion, while otherwise comparable applicants receive the cheaper referral. Which conclusion is best?

Accepted Answer

The broker's own referral conduct is covered and uses a prohibited basis

Answer

The broker is outside these rules because it does not fund the loans

Answer

Offering any referral satisfies the broker's nondiscrimination duty

Answer

The conduct becomes covered only if the costlier lender denies credit

Question 38

Which sequence best represents the reach of ECOA and Regulation B's discrimination and discouragement protections?

Accepted Answer

Advertising to prospective applicants, application review, terms, and dealings with existing credit

Answer

Completed application review through the approval or denial decision

Answer

Loan pricing through funding, excluding collection procedures

Answer

Written application intake through delivery of the closing documents

Question 39

A scoring review finds that a 61-year-old and a 62-year-old applicant can both contract. Which statement correctly separates general age protection from elderly status?

Accepted Answer

Both have general age protection; the 62-year-old also meets Regulation B's elderly definition

Answer

Neither has age protection until reaching age 65

Answer

The 61-year-old has no age protection because elderly status has not begun

Answer

Both meet the elderly definition because both are over 60

Question 40

An audit finds two practices: an income review conducted for authorized creditworthiness purposes, and a policy charging unmarried applicants more because they are unmarried. Which conclusion is most accurate?

Accepted Answer

The income review can be permitted, but the marital-status pricing policy uses a prohibited basis

Answer

Both are prohibited, because an income review can also reveal a person's marital status

Answer

Both are permitted if accurately described in loan disclosures

Answer

The pricing policy is permitted if the surcharge reflects the creditor's rights and remedies on that loan