Identify Fair Lending Violations - Nationwide Multistate Licensing System NMLS

1. Which ECOA protected basis prohibits discrimination because an applicant has exercised rights under consumer laws?

   Good faith exercise of rights under the Consumer Credit Protection Act. ECOA protects applicants from retaliation for asserting consumer rights, ensuring fair credit practices without fear of discrimination.

2. Identify the prohibited practice: refusing to consider verified child support or alimony income on an application.

   Failure to consider lawful income (disparate treatment). ECOA mandates consideration of all reliable income sources to avoid discrimination based on marital status or sex.

3. Under ECOA, when is it permissible to require a spouse's signature on a credit instrument?

   Only to reach jointly owned collateral or perfect a security interest. ECOA allows spousal signatures only in specific cases to secure interests without broadly discriminating on marital status.

4. Under ECOA, what is the general rule about asking an applicant's marital status?

   Allowed only in limited credit types; must use approved categories. ECOA restricts marital status questions to certain credit applications to avoid discrimination, requiring standardized terms.

5. Identify the prohibited practice: quoting higher rates to one race than another with similar credit qualifications.

   Disparate treatment in pricing. This intentional bias in terms violates ECOA by not offering equal credit terms to similarly qualified applicants.

6. What federal law prohibits discrimination in housing-related transactions, including residential mortgage lending?

   Fair Housing Act (FHA). FHA extends antidiscrimination protections to all aspects of residential real estate, including financing, to promote fair housing.

7. Identify the prohibited practice: requiring a spouse to co-sign when the applicant qualifies individually.

   Illegal spousal signature requirement. ECOA forbids requiring spousal guarantees unless necessary for creditworthiness, protecting against marital status discrimination.

8. Identify the prohibited practice: denying a loan because the applicant is pregnant or on maternity leave.

   Sex discrimination (including pregnancy-related discrimination). ECOA treats pregnancy as a form of sex discrimination to ensure credit decisions are not influenced by temporary conditions.

9. Identify the prohibited practice: marketing loans only in majority-white areas and avoiding minority communities.

   Discriminatory marketing (a form of redlining). This practice limits access for protected groups, constituting discrimination under FHA by unevenly promoting housing finance.

10. Identify the prohibited practice: steering a protected-class borrower to a costlier product when they qualify for better terms.

    Steering (discriminatory product placement). This violates fair lending by directing protected applicants to inferior products despite qualification for better options.

11. Which Fair Housing Act protected class specifically addresses discrimination against households with minors?

    Familial status. FHA defines familial status to protect families with children under 18 from housing discrimination, including in mortgage lending.

12. Which protected class is covered by ECOA but not listed as a protected class under the Fair Housing Act?

    Marital status (ECOA-only). ECOA includes marital status to prevent bias in credit decisions, unlike FHA which focuses on housing-specific protections.

13. Under ECOA, what is the term for treating an applicant differently because of a protected characteristic?

    Disparate treatment (intentional discrimination). This violates ECOA by intentionally applying unequal treatment or standards based on prohibited factors like race or sex.

14. Identify the prohibited practice: using different underwriting standards based on an applicant's national origin.

    Disparate treatment based on national origin. ECOA prohibits varying standards by national origin to ensure uniform and fair evaluation of all credit applications.

15. Under ECOA, what must a creditor allow regarding alimony, child support, or separate maintenance income?

    Applicant may choose whether to disclose it unless needed to qualify. ECOA requires disclosure to be optional to prevent discrimination while allowing reliance on such income for qualification.

16. Under the Fair Housing Act, what protected class covers physical or mental impairments and related accommodations?

    Disability (handicap). FHA requires reasonable accommodations for disabilities to ensure equal housing opportunities for those with impairments.

17. What is the prohibited practice of refusing to make loans or offering worse terms in certain neighborhoods?

    Redlining. Redlining discriminates by geography, often correlating with protected classes, violating FHA and ECOA in lending practices.

18. Which ECOA protected basis prohibits discrimination because an applicant receives public assistance income?

    Receipt of income from a public assistance program. ECOA requires creditors to evaluate public assistance income on the same basis as other income if it is reliable and verifiable.

19. Under ECOA, what is the general rule about asking an applicant's race, color, religion, or national origin?

    Prohibited, except where specifically permitted (for monitoring). ECOA generally bans such inquiries to prevent discrimination, allowing them only for compliance monitoring in specific cases.

20. What federal law prohibits credit discrimination by creditors in any aspect of a credit transaction?

    Equal Credit Opportunity Act (ECOA). ECOA mandates nondiscrimination in credit decisions to ensure equal access regardless of protected characteristics.

21. Under ECOA, what is the prohibited practice of discouraging applicants from applying based on a protected basis?

    Discouragement (a form of discrimination). ECOA prohibits pre-screening or dissuading applications based on protected classes to maintain equal credit access.

22. Under ECOA and FHA, what is the term for a neutral policy that disproportionately harms a protected class?

    Disparate impact. Such policies violate fair lending laws if they adversely affect protected groups without business necessity or less discriminatory alternatives.

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