CBP - Certified Banking Professional Banking Regulations and Compliance Questions and Answers 1 — Questions and Answers
Question 1: A bank's marketing department plans to launch a social media campaign for a new home equity line of credit (HELOC). The advertisement prominently features an attractive introductory Annual Percentage Rate (APR). According to Regulation Z of the Truth in Lending Act (TILA), which of the following is also required to be included in the advertisement to avoid being misleading?
- The period the introductory rate is in effect and the APR that will apply after the introductory period. (Correct answer)
- The bank's asset size and primary regulator.
- A statement that rates are subject to change without notice.
- The contact information for the bank's compliance officer.
Correct answer: The period the introductory rate is in effect and the APR that will apply after the introductory period.
Regulation Z (TILA) has specific rules for advertising open-end credit like HELOCs. If an advertisement includes a 'triggering term' such as an introductory APR, it must also clearly and conspicuously disclose additional information to provide the consumer with a complete picture. This includes the duration of the introductory rate and the APR that will be in effect afterward.
Question 2: A small community bank is undergoing a Community Reinvestment Act (CRA) examination. Examiners will assess the bank's performance primarily based on which of the following?
- The number of new deposit accounts opened in the last year.
- The bank's profitability and return on equity.
- How well the bank is meeting the credit needs of its entire community, including low- and moderate-income neighborhoods. (Correct answer)
- The total dollar amount of commercial loans originated, regardless of location.
Correct answer: How well the bank is meeting the credit needs of its entire community, including low- and moderate-income neighborhoods.
The Community Reinvestment Act (CRA) was enacted to encourage depository institutions to meet the credit needs of the communities in which they operate, with a particular focus on low- and moderate-income (LMI) neighborhoods. Examiners evaluate a bank's lending, investment, and service performance within its defined assessment areas.
Question 3: Under the Bank Secrecy Act (BSA), a bank must file a Suspicious Activity Report (SAR) in which of the following scenarios?
- A customer deposits $11,000 in cash in a single transaction.
- A customer who is a known local business owner frequently makes large, structured cash deposits that are just under the reporting threshold. (Correct answer)
- A customer applies for a mortgage loan with a low credit score.
- A long-time customer withdraws a large sum for a down payment on a house.
Correct answer: A customer who is a known local business owner frequently makes large, structured cash deposits that are just under the reporting threshold.
The Bank Secrecy Act requires financial institutions to assist U.S. government agencies in detecting and preventing money laundering. While a cash transaction over $10,000 requires a Currency Transaction Report (CTR), structuring deposits to avoid this threshold is a classic red flag for illegal activity, such as money laundering, and would require the filing of a SAR. The other scenarios are generally considered normal banking activities.
Question 4: Which of the following is a primary requirement of the Gramm-Leach-Bliley Act (GLBA) Safeguards Rule for financial institutions?
- To report all currency transactions over $5,000 to the Financial Crimes Enforcement Network (FinCEN).
- To provide customers with a free annual credit report.
- To develop, implement, and maintain a comprehensive written information security program. (Correct answer)
- To publicly disclose the minutes from all Board of Directors meetings.
Correct answer: To develop, implement, and maintain a comprehensive written information security program.
The GLBA Safeguards Rule specifically requires financial institutions to create and maintain a written information security program to protect the confidentiality and integrity of customer information. This program must include administrative, technical, and physical safeguards.
Question 5: A loan applicant is denied credit based in part on information obtained from a credit report. According to the Fair Credit Reporting Act (FCRA), what must the bank provide to the applicant?
- A copy of their internal credit scoring model.
- The direct phone number of the loan officer who made the decision.
- An adverse action notice that includes the name of the credit reporting agency that supplied the information. (Correct answer)
- An offer for a different credit product with a higher interest rate.
Correct answer: An adverse action notice that includes the name of the credit reporting agency that supplied the information.
When a creditor takes adverse action (like denying credit) based on information from a consumer reporting agency, the FCRA requires them to provide the consumer with an adverse action notice. This notice must include a statement that the credit reporting agency did not make the decision and cannot provide the reasons for it, and it must provide the name, address, and phone number of the agency that furnished the report.
Question 6: A bank's compliance program must include screening customer names against lists maintained by which of the following U.S. Treasury Department agencies to comply with economic and trade sanctions?
- The Internal Revenue Service (IRS).
- The Office of the Comptroller of the Currency (OCC).
- The Financial Crimes Enforcement Network (FinCEN).
- The Office of Foreign Assets Control (OFAC). (Correct answer)
Correct answer: The Office of Foreign Assets Control (OFAC).
The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions. Financial institutions are required to screen customers and transactions against OFAC's lists, such as the Specially Designated Nationals (SDN) list, to ensure they do not engage with prohibited individuals, entities, or countries.
CBP - Certified Banking Professional Banking Regulations and Compliance Questions and Answers 1
A bank's marketing department plans to launch a social media campaign for a new home equity line of credit (HELOC).
The advertisement prominently features an attractive introductory Annual Percentage Rate (APR).
According to Regulation Z of the Truth in Lending Act (TILA), which of the following is also required to be included in the advertisement to avoid being misleading?
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