Ethics practice

All 6 free ethics questions

1. Under Regulation X (12 CFR Part 1024), what makes an action a referral of settlement service business?

   • A It affirmatively influences the consumer's choice of provider Correct
   • B It appears in a written agreement between the parties The definition covers an oral action as well as a written one, so nothing has to be in writing.
   • C It names one provider and no alternative Pointing at a single provider is one way to influence a choice, but the rule turns on the effect on the selection rather than on how many providers were named.
   • D It is made after the loan application is taken Timing is not part of the definition, which reaches an action at any point that influences the selection.

   A referral is any oral or written action that has the effect of affirmatively influencing which settlement service provider a person selects, so the form the action takes does not matter and a spoken recommendation counts.

   Regulation X, 12 CFR s. 1024.14(f)(1)

2. On a dwelling-secured consumer credit transaction, when may the consumer and the creditor agree to resolve a dispute by arbitration?

   • A After the dispute or claim has arisen Correct
   • B In the loan contract signed at closing A term in the loan contract requiring arbitration is exactly what the rule prohibits.
   • C At any time, if the consumer waives court rights A waiver of the right to bring a federal claim in court cannot be applied against the consumer either.
   • D Never, because arbitration of mortgage disputes is banned Arbitration becomes available once a dispute exists, so the prohibition is not total.

   The contract may not require arbitration, but the prohibition does not stop the consumer and the creditor or an assignee from agreeing to arbitrate after a dispute or claim under the transaction arises, so the timing of the agreement decides it.

   Regulation Z, 12 CFR s. 1026.36(h)(1)

3. Before a high-cost mortgage that refinances an existing debt, what may a creditor or mortgage broker not tell the consumer to do?

   • A Default on the existing loan or debt Correct
   • B Pay down the existing balance before closing Paying a balance down is not a default and nothing in the rule prohibits suggesting it.
   • C Shop the refinance with another lender Telling a consumer to compare offers is not conduct this rule reaches.
   • D Obtain counseling on the advisability of the mortgage Counseling on the advisability of a high-cost mortgage is required before the loan is extended.

   The rule prohibits a creditor or mortgage broker from recommending or encouraging default on an existing loan or other debt before and in connection with a high-cost mortgage that refinances that debt, and it names the broker as well as the creditor.

   Regulation Z, 12 CFR s. 1026.34(a)(6)

4. An advertisement for credit states specific credit terms. Which terms may it state?

   • A Only terms the creditor is or will be offering Correct
   • B Any terms the consumer might qualify for elsewhere What a consumer could get from someone else is not a term this creditor is arranging or offering.
   • C Terms the creditor once offered but has discontinued A term that is no longer offered is not one that actually is or will be arranged.
   • D Terms the creditor could offer if the market improved A term the creditor might reach under better conditions is not one it actually is or will be offering.

   If an advertisement states specific credit terms it may state only those terms that actually are or will be arranged or offered by the creditor, which closes off the rate advertised to draw calls that nobody can get.

   Regulation Z, 12 CFR s. 1026.24(a)

5. Without prior consent, when may a telemarketer place an outbound call to a person's residence under the Telemarketing Sales Rule?

   • A 8 a.m. to 9 p.m. at the called location Correct
   • B 8 a.m. to 9 p.m. where the caller sits The window is measured at the called person's location, which is what matters when a call crosses time zones.
   • C 9 a.m. to 8 p.m. at the called location The permitted window opens at 8 in the morning and closes at 9 in the evening.
   • D 8 a.m. to 9 p.m. on business days only The rule states hours and does not limit calls to business days.

   Without prior consent it is an abusive telemarketing practice to call a person's residence outside 8:00 a.m. to 9:00 p.m. local time at the called person's location, so the clock that governs is the consumer's and not the caller's.

   16 CFR s. 310.4(c)

6. Fixing the interest rate or duration of a dwelling-secured loan because of which factors is unlawful under the Fair Housing Act rules?

   • A Race, color, religion, sex, handicap, familial status, national origin Correct
   • B Race, color, religion, age, marital status, national origin Age and marital status come from the Equal Credit Opportunity Act list, and handicap and familial status are missing here.
   • C Race, color, income source, sex, age, national origin Source of income and age are not on the list this rule names.
   • D Race, color, religion, sex, credit score, national origin A credit score is a lawful underwriting factor and not a protected characteristic.

   The rule makes it unlawful to determine the type of loan or to fix the amount, interest rate, cost, duration or other terms for a dwelling loan because of race, color, religion, sex, handicap, familial status or national origin, and that seven-item list is the one it names.

   24 CFR s. 100.130(b)(2)