CRCM FLASHCARDS
During a recent compliance examination, regulators cited the bank for violations of
various marketing regulations. How should the compliance professional FIRST
respond? ANSWERS-Review the marketing materials and applicable regulations to
verify the finding.
When a bank is cited for a regulatory violation, the compliance professional must first
determine whether the bank should agree with it. This is done by reviewing the pertinent
regulations and affected materials. If the citation is supported by the regulations, then
the compliance manager should discuss it with the marketing manager. Solutions may
include training marketing personnel or establishing new policies for reviews.
During a recent compliance examination, regulatory examiners found that the bank was
not conducting flood hazard area determinations before closing on construction loans.
The compliance professional has reviewed the files and agreed with the examiners'
finding. What should be done FIRST? ANSWERS-Review the bank's flood policies and
procedures to determine where the compliance failure occurred.
If the compliance professional agrees with the regulators on a finding, the root cause of
the error must be determined by consulting policies and procedures. There is no benefit
to conducting a risk assessment because the issue is known. After determining the
cause, then the extent of the problem must be determined. Only after gathering this
pertinent information can the compliance professional write an analysis for management
explaining the situation
Legislation was recently enacted to reform consumer real estate protection laws, and
the bank will now have to change the way it documents, discloses, and advertises real
estate loans, an integral product line at your bank. What should the compliance
professional do FIRST to implement the new law within the bank? ANSWERS-Form a
task force of the business unit managers whose departments will be affected by the law
to collectively form an action plan.
When implementing new rules, it is beneficial to start with a task force of affected
managers that can make decisions about how to implement the new rule. The other
actions would eventually become necessary, but it would be timelier to write the new
policy and then develop training only after the compliance professional has a clearer
idea of needed actions. Talking to the bank president about resources would not be
helpful to implementing new legislation, unless it can be shown as necessary to
complying as the business units have chosen.
The federal banking agencies have proposed an amendment to Regulation Z that would
require a new early disclosure statement for loans secured by the borrower's principal
dwelling. After reading the proposed change, what should the compliance professional
do FIRST? ANSWERS-Prepare a summary document that outlines the effects the
proposed rule would have on the bank's operations.
,CRCM FLASHCARDS
This proposed change is important to the bank. The compliance professional should first
analyze its effect and provide that summary to the affected business units, and then
establish a task force to study the proposal. Contacting the vendor may be part of the
risk considered by the task force. Training bank staff regarding the new rule is not
appropriate until the rule is final. Proposed rules sometimes do not become final or may
change with the final ruling.
A bank has a large mortgage department as well as a high HMDA error rate. An
expensive software program could automate the process, but the business unit
manager does not want to purchase the software because of its expense. Though it is
not as efficient, the manager prefers to make some improvements to the manual
process, add some more robust monitoring procedures, and opt not to purchase the
software. What should the compliance professional do? ANSWERS-Document the fact
that the level of risk present with manual systems is acceptable to the mortgage
department business unit.
The job of the compliance officer is to assess the risks and inform management of those
risks. The business unit can decide what level of risk to accept. If the high level of
HMDA errors continues, even with the improved procedures, the problem can be
escalated and brought to senior management's attention.
A compliance professional is a member of the task force studying how the bank can
reduce customer complaints about holding deposits. One proposed solution involves
purchasing an expensive system that will reduce the number of holds placed by
evaluating the customer's history and relationship with the bank. Which of the following
roles is MOST important for the compliance professional on the task force? ANSWERS-
Validating the system to ensure it complies with regulatory restrictions.
The compliance professional's role on a task force is to provide knowledge about
compliance risk, such as whether the system is in compliance with relevant laws and
regulations. The training, parameters, and cost-benefit analysis are more operational in
nature.
A bank's president would like to begin offering a new home equity line of credit product
within two weeks. In all cases the borrower's principal dwelling will secure the loan. The
president has already launched a planned advertising campaign for the bank's major
service markets. What should the compliance professional do FIRST? ANSWERS-
Perform a risk assessment to determine the bank's level of risk in offering this new
product.
Before going forward, the compliance professional needs to determine what level and
types of risk are involved. It is possible the new product is similar to an existing product,
and the new offering will not increase the bank's risk. After determining the risk, the
compliance professional will know better how to proceed
,CRCM FLASHCARDS
When developing a training plan for commercial lenders, which of the following
regulations is least important to include? ANSWERS-Truth in Lending Act, CFPB
Regulation Z
The compliance professional should risk manage the training program. A commercial
group needs to know the rules for fair lending, HMDA, and insider lending. Regulation Z
is more relevant for the consumer lending audience.
Under Regulation M, what is a "consumer lease"?
12 CFR 1013 ANSWERS-A consumer lease for the annually adjusted threshold amount
or less for the use of personal property
Roberta Milton's car lease with First National Bank reached its termination on August 1.
Roberta and the bank agreed to extend the lease on a month-to-month basis without
charging her a fee for doing so. What disclosure responsibilities does the bank have
now? ANSWERS-None, until after six months of the month-to-month lease
A bank does not know all of the specific information to be disclosed on the lease at the
time of the consummation. What may the bank do after attempting to obtain the
information? ANSWERS-Estimate the amounts and note that the information is
estimated
When must disclosures on consumer leasing transactions subject to Regulation M be
made? ANSWERS-Before the consummation of the lease
First National's consumer leasing department placed an ad in the local paper that
pictured a car with the caption, "Sign a lease with us and pay only $275 per month."
What other information must this ad have? ANSWERS-The total amount due at
consummation or delivery, the number of payments required, and any required security
deposit
Any of the following triggering terms will require full disclosures in the advertisement:
the amount of any payment, the number of required payments, or a statement that no
down payment or other payment is required at consummation. The information that is
required to be disclosed includes the payment information, the total amount due at
consummation, and any required security deposit. The bank must also disclose any
extra charges required at the end of the lease term if the lessee's liability is based on
the difference between the residual value and the realized value of the leased property.
What insurance disclosures are required in the lease disclosure statement? ANSWERS-
The types and amounts of coverage provided by the lessor and the cost to the lessee.
, CRCM FLASHCARDS
If provided by the lessor, the disclosure must include the types, amounts, and cost to
the lessee. If not provided by the lessor, the type and amount must be disclosed.
Records regarding compliance with Regulation M must be kept for how long?
ANSWERS-Two years after the disclosures are made
With regard to standards for wear and use of leased property, which of the following
statements is true? ANSWERS-A lessor must provide a notice of wear and use
standards on motor vehicle leases.
Milton Edwards leased an automobile from First National Bank. The lease contained a
provision whereby Milton would be liable for the automobile at the end of the lease
based on its fair market value. At the end of the lease, the bank notified Milton that the
value of the automobile, based on industry publications, was $10,500 and required him
to pay that amount to obtain ownership of the property. Milton objected and requested
that the car be individually appraised. What must the bank do? ANSWERS-Allow Milton
to hire an independent appraiser to appraise the automobile (both parties agree to be
bound by the appraisal)
The initial disclosure requires that certain disclosures relating to the termination of a
lease be given to the consumer. Which of these disclosures is NOT required?
ANSWERS-Whether the lease may be extended at the option of the lessee
Which of the following actions is NOT an adverse action? ANSWERS-Refusal to grant
credit on the grounds that the lender does not offer the type of credit requested.
ACME Bank is a state nonmember bank with all of its offices in one state. However, it
also has an Internet Web site where it advertises consumer credit and accepts
applications from a five-state regional area. Two of the states are community property
states. The other three are not. What is the best explanation for what ACME bank's
management should do to comply with the FDIC ECOA spousal signature guidance?
ANSWERS-ACME must become familiar with the laws of each of the five states and ask
for spouse signatures only when appropriate under the law.
For what do ECOA and Regulation B extend coverage? ANSWERS-All types of credit.
The prohibition against discrimination in the Equal Credit Opportunity Act and
Regulation B applies to all types of credit regardless of the borrower, amount, or
purpose. Certain adverse action notification requirements apply only to credit to
consumers for personal, family, and household purposes and to credit extended to
businesses that have $1 million or less in gross revenues.
During a recent compliance examination, regulators cited the bank for violations of
various marketing regulations. How should the compliance professional FIRST
respond? ANSWERS-Review the marketing materials and applicable regulations to
verify the finding.
When a bank is cited for a regulatory violation, the compliance professional must first
determine whether the bank should agree with it. This is done by reviewing the pertinent
regulations and affected materials. If the citation is supported by the regulations, then
the compliance manager should discuss it with the marketing manager. Solutions may
include training marketing personnel or establishing new policies for reviews.
During a recent compliance examination, regulatory examiners found that the bank was
not conducting flood hazard area determinations before closing on construction loans.
The compliance professional has reviewed the files and agreed with the examiners'
finding. What should be done FIRST? ANSWERS-Review the bank's flood policies and
procedures to determine where the compliance failure occurred.
If the compliance professional agrees with the regulators on a finding, the root cause of
the error must be determined by consulting policies and procedures. There is no benefit
to conducting a risk assessment because the issue is known. After determining the
cause, then the extent of the problem must be determined. Only after gathering this
pertinent information can the compliance professional write an analysis for management
explaining the situation
Legislation was recently enacted to reform consumer real estate protection laws, and
the bank will now have to change the way it documents, discloses, and advertises real
estate loans, an integral product line at your bank. What should the compliance
professional do FIRST to implement the new law within the bank? ANSWERS-Form a
task force of the business unit managers whose departments will be affected by the law
to collectively form an action plan.
When implementing new rules, it is beneficial to start with a task force of affected
managers that can make decisions about how to implement the new rule. The other
actions would eventually become necessary, but it would be timelier to write the new
policy and then develop training only after the compliance professional has a clearer
idea of needed actions. Talking to the bank president about resources would not be
helpful to implementing new legislation, unless it can be shown as necessary to
complying as the business units have chosen.
The federal banking agencies have proposed an amendment to Regulation Z that would
require a new early disclosure statement for loans secured by the borrower's principal
dwelling. After reading the proposed change, what should the compliance professional
do FIRST? ANSWERS-Prepare a summary document that outlines the effects the
proposed rule would have on the bank's operations.
,CRCM FLASHCARDS
This proposed change is important to the bank. The compliance professional should first
analyze its effect and provide that summary to the affected business units, and then
establish a task force to study the proposal. Contacting the vendor may be part of the
risk considered by the task force. Training bank staff regarding the new rule is not
appropriate until the rule is final. Proposed rules sometimes do not become final or may
change with the final ruling.
A bank has a large mortgage department as well as a high HMDA error rate. An
expensive software program could automate the process, but the business unit
manager does not want to purchase the software because of its expense. Though it is
not as efficient, the manager prefers to make some improvements to the manual
process, add some more robust monitoring procedures, and opt not to purchase the
software. What should the compliance professional do? ANSWERS-Document the fact
that the level of risk present with manual systems is acceptable to the mortgage
department business unit.
The job of the compliance officer is to assess the risks and inform management of those
risks. The business unit can decide what level of risk to accept. If the high level of
HMDA errors continues, even with the improved procedures, the problem can be
escalated and brought to senior management's attention.
A compliance professional is a member of the task force studying how the bank can
reduce customer complaints about holding deposits. One proposed solution involves
purchasing an expensive system that will reduce the number of holds placed by
evaluating the customer's history and relationship with the bank. Which of the following
roles is MOST important for the compliance professional on the task force? ANSWERS-
Validating the system to ensure it complies with regulatory restrictions.
The compliance professional's role on a task force is to provide knowledge about
compliance risk, such as whether the system is in compliance with relevant laws and
regulations. The training, parameters, and cost-benefit analysis are more operational in
nature.
A bank's president would like to begin offering a new home equity line of credit product
within two weeks. In all cases the borrower's principal dwelling will secure the loan. The
president has already launched a planned advertising campaign for the bank's major
service markets. What should the compliance professional do FIRST? ANSWERS-
Perform a risk assessment to determine the bank's level of risk in offering this new
product.
Before going forward, the compliance professional needs to determine what level and
types of risk are involved. It is possible the new product is similar to an existing product,
and the new offering will not increase the bank's risk. After determining the risk, the
compliance professional will know better how to proceed
,CRCM FLASHCARDS
When developing a training plan for commercial lenders, which of the following
regulations is least important to include? ANSWERS-Truth in Lending Act, CFPB
Regulation Z
The compliance professional should risk manage the training program. A commercial
group needs to know the rules for fair lending, HMDA, and insider lending. Regulation Z
is more relevant for the consumer lending audience.
Under Regulation M, what is a "consumer lease"?
12 CFR 1013 ANSWERS-A consumer lease for the annually adjusted threshold amount
or less for the use of personal property
Roberta Milton's car lease with First National Bank reached its termination on August 1.
Roberta and the bank agreed to extend the lease on a month-to-month basis without
charging her a fee for doing so. What disclosure responsibilities does the bank have
now? ANSWERS-None, until after six months of the month-to-month lease
A bank does not know all of the specific information to be disclosed on the lease at the
time of the consummation. What may the bank do after attempting to obtain the
information? ANSWERS-Estimate the amounts and note that the information is
estimated
When must disclosures on consumer leasing transactions subject to Regulation M be
made? ANSWERS-Before the consummation of the lease
First National's consumer leasing department placed an ad in the local paper that
pictured a car with the caption, "Sign a lease with us and pay only $275 per month."
What other information must this ad have? ANSWERS-The total amount due at
consummation or delivery, the number of payments required, and any required security
deposit
Any of the following triggering terms will require full disclosures in the advertisement:
the amount of any payment, the number of required payments, or a statement that no
down payment or other payment is required at consummation. The information that is
required to be disclosed includes the payment information, the total amount due at
consummation, and any required security deposit. The bank must also disclose any
extra charges required at the end of the lease term if the lessee's liability is based on
the difference between the residual value and the realized value of the leased property.
What insurance disclosures are required in the lease disclosure statement? ANSWERS-
The types and amounts of coverage provided by the lessor and the cost to the lessee.
, CRCM FLASHCARDS
If provided by the lessor, the disclosure must include the types, amounts, and cost to
the lessee. If not provided by the lessor, the type and amount must be disclosed.
Records regarding compliance with Regulation M must be kept for how long?
ANSWERS-Two years after the disclosures are made
With regard to standards for wear and use of leased property, which of the following
statements is true? ANSWERS-A lessor must provide a notice of wear and use
standards on motor vehicle leases.
Milton Edwards leased an automobile from First National Bank. The lease contained a
provision whereby Milton would be liable for the automobile at the end of the lease
based on its fair market value. At the end of the lease, the bank notified Milton that the
value of the automobile, based on industry publications, was $10,500 and required him
to pay that amount to obtain ownership of the property. Milton objected and requested
that the car be individually appraised. What must the bank do? ANSWERS-Allow Milton
to hire an independent appraiser to appraise the automobile (both parties agree to be
bound by the appraisal)
The initial disclosure requires that certain disclosures relating to the termination of a
lease be given to the consumer. Which of these disclosures is NOT required?
ANSWERS-Whether the lease may be extended at the option of the lessee
Which of the following actions is NOT an adverse action? ANSWERS-Refusal to grant
credit on the grounds that the lender does not offer the type of credit requested.
ACME Bank is a state nonmember bank with all of its offices in one state. However, it
also has an Internet Web site where it advertises consumer credit and accepts
applications from a five-state regional area. Two of the states are community property
states. The other three are not. What is the best explanation for what ACME bank's
management should do to comply with the FDIC ECOA spousal signature guidance?
ANSWERS-ACME must become familiar with the laws of each of the five states and ask
for spouse signatures only when appropriate under the law.
For what do ECOA and Regulation B extend coverage? ANSWERS-All types of credit.
The prohibition against discrimination in the Equal Credit Opportunity Act and
Regulation B applies to all types of credit regardless of the borrower, amount, or
purpose. Certain adverse action notification requirements apply only to credit to
consumers for personal, family, and household purposes and to credit extended to
businesses that have $1 million or less in gross revenues.
