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CCBCO practice questions

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Question 1Compliance Program Management and Governance

A compliance officer is drafting the annual compliance program charter for a bank subject to the BSA/AML compliance program rule. Which element must the charter establish as a minimum requirement of the program?

  1. A profit target tied to fee income from high-risk customers
  2. A quarterly external audit performed by a bank regulator
  3. A contractual guarantee that no violations will occur
  4. A system of internal controls to ensure ongoing compliance Correct answer.

Explanation

The BSA/AML compliance program rule requires covered institutions to maintain a program with a specified minimum set of elements, including a system of internal controls, a designated compliance officer, ongoing employee training, and independent testing. Internal controls are the foundational element that ties policies, procedures, and monitoring together.

Question 2Compliance Program Management and Governance

Under the BSA/AML compliance program rule, who is responsible for designating the individual who will coordinate and monitor day-to-day compliance?

  1. The federal functional regulator's examiner-in-charge
  2. The institution's largest deposit customer
  3. The external independent tester
  4. The board of directors or an appropriate board committee Correct answer.

Explanation

The rule requires the board of directors, or a committee designated by the board, to designate a qualified compliance officer responsible for coordinating and monitoring day-to-day compliance. Designation at the board level fixes accountability at the top of the governance structure.

Question 3Compliance Program Management and Governance

A bank's compliance committee wants to document how risk appetite for BSA/AML is set and cascaded into business-line limits. Which governance artifact most directly serves this purpose?

  1. A board-approved compliance risk appetite statement with supporting metrics Correct answer.
  2. A vendor contract for transaction monitoring software
  3. A list of employees who completed last year's training
  4. A customer complaint log maintained by the branch network

Explanation

A risk appetite statement approved at the board level articulates the amount and type of compliance risk the institution is willing to accept and is operationalized through metrics and limits. It is the governance document that connects board intent to business-line behavior.

Question 4Compliance Program Management and Governance

Which activity best describes the purpose of independent testing within a BSA/AML compliance program?

  1. Setting the institution's overall strategic growth plan
  2. Performing the daily alert clearing that the compliance operations team handles
  3. Objectively evaluating whether the program's controls are adequate and functioning as designed Correct answer.
  4. Approving new high-risk customer relationships before onboarding

Explanation

Independent testing provides objective evaluation of the adequacy and effectiveness of the compliance program, including whether controls operate as designed. Independence means the testers are not responsible for the functions they review.

Question 5Compliance Program Management and Governance

A compliance manager is mapping the three lines of defense for BSA/AML. Which group constitutes the first line?

  1. Business units and operations staff who own and execute customer-facing controls Correct answer.
  2. An outside law firm retained for legal advice
  3. The board's risk committee
  4. The internal audit function reporting to the audit committee

Explanation

The first line consists of the business and operational staff who take on risk and are responsible for executing controls such as customer due diligence and alert review. The second line provides compliance oversight, and internal audit forms the third line.

Question 6Compliance Program Management and Governance

Which statement correctly describes the training element of a BSA/AML compliance program?

  1. Training is satisfied once at hire and never needs repeating
  2. Training is required only for the compliance officer and the board
  3. Training must be provided to appropriate personnel and should be tailored to the risks they handle Correct answer.
  4. Training content is set exclusively by the institution's primary regulator

Explanation

The rule requires ongoing training for appropriate personnel, and effective programs tailor content to the specific risks and roles of the audience. Recurrence and role relevance are both part of a sound training control.

Question 7Compliance Program Management and Governance

A board is establishing a compliance committee to oversee the BSA/AML program. Which practice best supports effective governance?

  1. Delegating all oversight permanently to a single branch manager
  2. Limiting committee minutes to attendance records
  3. Receiving regular reporting on risk assessments, monitoring results, and remediation status Correct answer.
  4. Reviewing compliance metrics only after an examination finding

Explanation

Effective board or committee oversight depends on regular, substantive reporting on risk, control performance, and remediation so that governance bodies can challenge and direct management. Minutes should document the substance of those discussions and decisions.

Question 8Compliance Program Management and Governance

Which document typically establishes the authority, scope, and reporting lines of the BSA/AML compliance function?

  1. The institution's marketing style guide
  2. The compliance program charter approved by the board Correct answer.
  3. The vendor risk questionnaire
  4. The teller cash-handling procedure

Explanation

A compliance program charter defines the compliance function's mandate, authority, scope, and reporting relationships and is typically approved at the board level. It anchors the function's independence and standing within the organization.

Question 9Compliance Program Management and Governance

An institution's risk assessment shows that a new product line will materially increase exposure to high-risk jurisdictions. What is the most appropriate governance response?

  1. Ask the independent tester to approve the product launch
  2. Proceed with launch and revisit the risk assessment at the next annual cycle
  3. Update the BSA/AML risk assessment and adjust controls and monitoring before launch Correct answer.
  4. Rely on the existing monitoring rules without change because they are already validated

Explanation

The risk assessment is a living governance tool, and a material change such as a new product or geography should trigger reassessment and corresponding control adjustments before the risk is assumed. Waiting for the annual cycle leaves the institution exposed.

Question 10Compliance Program Management and Governance

A compliance officer reports to the head of the business line whose activities generate most of the institution's high-risk customers. Which governance concern does this create?

  1. Overstaffing of the compliance department
  2. Excessive training frequency for branch staff
  3. Compromised independence of the compliance function Correct answer.
  4. Insufficient marketing of compliance policies

Explanation

Reporting into the business that compliance must oversee creates a conflict that can compromise the compliance function's independence and objectivity. Sound governance provides escalation paths to the board or a committee outside that line.

Question 11Compliance Program Management and Governance

During an internal review, a compliance manager finds that alert-clearing staff routinely close alerts without documenting their analysis. What governance action is most appropriate?

  1. Wait for the next external examination to see whether examiners notice
  2. Escalate the control gap, require documented rationale for closures, and track remediation to completion Correct answer.
  3. Reassign the staff to a different department without further action
  4. Revise the policy to remove the documentation requirement

Explanation

Undocumented alert dispositions undermine the monitoring control and create an audit and regulatory risk. Good governance requires escalation, corrective action, and tracked remediation rather than concealment or weakening of the standard.

Question 12Compliance Program Management and Governance

A bank changes its customer onboarding system to a new platform. Which governance step best ensures the BSA/AML program remains effective during the transition?

  1. Rely on the vendor's certification that the platform meets all regulatory requirements
  2. Delay updating policies until after the first examination on the new system
  3. Perform a change-management review that includes compliance risk, control testing, and data integrity checks Correct answer.
  4. Suspend independent testing until the platform has been live for two years

Explanation

Change management for systems affecting BSA/AML controls should assess compliance risk, validate data and control performance, and confirm policies remain accurate. Vendor claims do not substitute for institution-specific validation.

Question 13Compliance Program Management and Governance

A compliance program's policies state that high-risk customers are reviewed annually, but the procedure manual says reviews occur every two years. What is the most significant governance risk?

  1. Inconsistent standards cause inconsistent execution and weaken the control environment Correct answer.
  2. Customers will receive too many communications about their accounts
  3. The compliance officer will have insufficient work to perform
  4. The institution will exceed its training budget

Explanation

Conflicts between governing policy and operational procedures create ambiguity about the required standard and lead to inconsistent execution. Governance should resolve the conflict, align documents, and confirm which standard is authoritative.

Question 14Compliance Program Management and Governance

Which metric most usefully indicates to a board committee whether the BSA/AML monitoring control is operating effectively?

  1. The count of branches opened in the last year
  2. The total dollar amount of deposits held by the bank
  3. The percentage of alerts resolved within established timeframes with documented analysis Correct answer.
  4. The number of employees who attended the annual holiday party

Explanation

Timeliness and documentation of alert dispositions directly measure whether the monitoring control is functioning as designed. Board reporting should focus on metrics tied to control performance and risk.

Question 15Compliance Program Management and Governance

A compliance officer wants to strengthen escalation of potential suspicious activity that senior business managers may resist reporting. Which governance mechanism addresses this?

  1. A requirement that all escalations be approved by the business manager first
  2. An informal understanding that concerns are raised verbally
  3. A documented escalation policy that allows compliance to report directly to the board or its committee Correct answer.
  4. A policy that limits escalation to the annual audit cycle

Explanation

A clear escalation policy with a direct path to the board or a committee protects compliance's ability to raise concerns free of business-line pressure. Governance should ensure that escalation cannot be blocked by the very unit whose activity is at issue.

Question 16Compliance Program Management and Governance

Which approach best demonstrates that a BSA/AML training program is effective rather than merely delivered?

  1. Measuring comprehension and role-specific application through assessments and targeted follow-up Correct answer.
  2. Recording the length of each training session
  3. Tracking the number of training vendors considered
  4. Counting the number of slides in the training deck

Explanation

Effectiveness is evidenced by whether staff understand and can apply requirements in their roles, which assessments and targeted follow-up can demonstrate. Delivery statistics alone do not show that learning or behavior changed.

Question 17Compliance Program Management and Governance

The board asks how the compliance program's independent testing scope is determined. Which answer is most consistent with sound governance?

  1. Scope is risk-based, covering higher-risk activities more frequently and deeply, and is approved with the audit plan Correct answer.
  2. Scope is set by the software vendor's default configuration
  3. Scope is limited to whatever the prior examiner sampled
  4. Scope is fixed permanently and never revisited

Explanation

Independent testing should be risk-based, concentrating resources on higher-risk areas, and its plan should be reviewed and approved through governance. A fixed or examiner-driven scope fails to respond to the institution's actual risk profile.

Question 18Compliance Program Management and Governance

A compliance department has no written procedures for investigating alerts, relying on experienced analysts' judgment. Which governance weakness is most significant?

  1. The alert volume will automatically decrease
  2. The department will need fewer training resources
  3. The control depends on individual knowledge and cannot be consistently applied, tested, or defended Correct answer.
  4. The analysts are likely to be overpaid relative to their duties

Explanation

Without documented procedures, the investigation control varies by individual, cannot be reliably tested, and is difficult to defend to examiners. Codifying procedures makes the control repeatable and auditable.

Question 19Compliance Program Management and Governance

Senior management proposes reducing the compliance budget by eliminating independent testing for two years to cut costs. What is the most appropriate governance response?

  1. Accept the proposal if the compliance officer personally performs the testing
  2. Defer the decision to the largest business-line manager
  3. Accept the proposal because cost reduction always improves institutional safety
  4. Reject the proposal because independent testing is a required program element and its removal raises regulatory risk Correct answer.

Explanation

Independent testing is a required element of the BSA/AML compliance program, and eliminating it for cost reasons creates significant regulatory and control risk. Governance should preserve required elements and, if resources are constrained, re-scope rather than remove them.

Question 20Compliance Program Management and Governance

A financial institution operates through a holding company with multiple subsidiaries. Which governance structure best supports a consistent BSA/AML program across the enterprise?

  1. An enterprise-wide program with a designated officer, common standards, and subsidiary-level accountability Correct answer.
  2. A single branch manager overseeing all subsidiaries' compliance
  3. Reliance on each subsidiary's external auditor to set program standards
  4. Fully independent programs in each subsidiary with no shared standards or reporting

Explanation

An enterprise-wide program with centralized standards, a designated officer, and clear subsidiary accountability provides consistency while preserving local responsibility. Fragmented programs without shared standards create gaps and uneven controls.

Question 21Compliance Program Management and Governance

A compliance officer discovers that a senior manager approved onboarding of a politically exposed person without the required enhanced due diligence. Which action best reflects sound governance?

  1. Waive the EDD requirement for the customer going forward
  2. Quietly document the exception and take no further action to avoid conflict
  3. Escalate through established channels, ensure EDD is completed or the relationship is exited, and address the control failure Correct answer.
  4. Ask the senior manager to self-certify that EDD was performed

Explanation

A control bypass involving a senior manager must be escalated, remediated, and analyzed for root cause so the failure is not repeated. Waiving requirements or accepting self-certification undermines the control and accountability.

Question 22Compliance Program Management and Governance

A board committee reviews a compliance dashboard showing rising alert volumes, stable staffing, and declining investigation quality scores. Which interpretation best reflects sound governance judgment?

  1. The quality scores should be removed from the dashboard to avoid concern
  2. Staffing should be reduced because alerts are being generated
  3. Control capacity is under strain and may require additional resources or rule tuning before quality degrades further Correct answer.
  4. The rising alert volume proves the program is performing well and needs no action

Explanation

Rising volume with flat staffing and declining quality signals that investigation capacity is being overwhelmed, which threatens the monitoring control. Governance judgment should connect the trend to resourcing or tuning decisions before failures occur.

Question 23Compliance Program Management and Governance

An institution's risk assessment has not been updated in three years despite growth into new products, geographies, and customer types. Which consequence most directly threatens the compliance program?

  1. The compliance officer will lose the ability to sign documents
  2. The board will be unable to approve the annual budget
  3. Training records will automatically expire
  4. Controls and monitoring may be misaligned with the institution's actual risk profile Correct answer.

Explanation

The risk assessment drives the design of controls, monitoring, and testing; a stale assessment leaves the program calibrated to an outdated risk profile. Governance requires periodic and event-driven updates so controls track actual exposure.

Question 24Compliance Program Management and Governance

A compliance function reports to the chief risk officer, who also chairs the committee that approves the business line's risk limits. Which governance design flaw is most relevant?

  1. Combining oversight of compliance with authority over the business's risk limits can blur accountability and reduce challenge Correct answer.
  2. The structure makes training unnecessary for business staff
  3. The structure eliminates the need for independent testing
  4. The structure guarantees excessive independence from the board

Explanation

When the same executive both oversees compliance and controls the business's risk limits, the separation between second-line challenge and business decision-making can blur. Governance should preserve clear accountability and an effective challenge process.

Question 25Compliance Program Management and Governance

An examiner notes that the institution's compliance program exists on paper but business units routinely override monitoring outcomes. Which governance remedy most directly addresses the root cause?

  1. Increase the frequency of staff training on product features
  2. Add more policies without changing reporting lines or authority
  3. Outsource all compliance decisions to the business units
  4. Establish board-endorsed authority for compliance decisions with documented override approval and monitoring Correct answer.

Explanation

The root cause is a lack of enforceable compliance authority and accountability when business units override controls. Board-endorsed authority, documented override approvals, and monitoring of overrides address that cause directly.

Question 26Compliance Program Management and Governance

Under the BSA/AML program rules, which individual is required to be designated by the board of directors to ensure day-to-day compliance with the Bank Secrecy Act?

  1. A qualified compliance officer responsible for coordinating and monitoring BSA/AML compliance Correct answer.
  2. The chief executive officer acting in a dual capacity
  3. An outside counsel retained on an annual basis
  4. The internal audit director serving ex officio

Explanation

The BSA/AML program rule requires the board to designate a qualified compliance officer who is responsible for coordinating and monitoring day-to-day compliance. This individual must have sufficient authority, resources, and access to the board to be effective.

Question 27Compliance Program Management and Governance

An institution's written BSA/AML program is approved once by the board and never revisited. Which governance practice best aligns with regulatory expectations for board oversight?

  1. Re-approving the program every five years to match the strategic plan cycle
  2. Approving the program only when an examiner requests documentation
  3. Reviewing and re-approving the program at least annually and whenever material changes occur Correct answer.
  4. Delegating all program approval to the compliance officer to streamline decisions

Explanation

Regulators expect the board to review and approve the BSA/AML program at least annually and whenever significant changes affect risk or operations. Ongoing board engagement, not one-time approval, is the governance standard.

Question 28Compliance Program Management and Governance

A compliance officer identifies a gap: the institution's customer due diligence procedures do not address beneficial ownership for legal entity customers. Which action best reflects a sound program management response?

  1. Waiting for the next scheduled independent test to surface the gap formally
  2. Closing the gap in the procedure manual without notifying senior management
  3. Reclassifying legal entity customers as low risk to reduce the procedural burden
  4. Documenting the gap, assigning an owner and remediation date, and reporting status to the board or its committee Correct answer.

Explanation

Sound program management requires gaps to be logged, assigned an accountable owner with a target date, and tracked through governance reporting until remediated. Escalating status to the board or its committee keeps oversight informed and creates accountability.

Question 29Compliance Program Management and Governance

A compliance officer at a mid-sized bank is asked to build a governance calendar for the BSA/AML program. Which set of recurring activities best reflects a complete governance cycle?

  1. Annual external audit and biennial policy updates only
  2. Monthly transaction monitoring tuning and daily alert clearing only
  3. Quarterly staff performance reviews and annual budget approval only
  4. Annual risk assessment, policy review and approval, training delivery, independent testing, and board reporting Correct answer.

Explanation

A complete BSA/AML governance cycle links the risk assessment to policy approval, training, independent testing, and regular board reporting. These interconnected activities demonstrate that the program is continuously managed rather than episodic.

Question 30Compliance Program Management and Governance

An institution's compliance function sits within the business line it monitors, and the business head controls the compliance budget and performance ratings. Which governance change most effectively addresses the resulting independence concern?

  1. Establishing a reporting line to the board or a board committee with input into the compliance budget and performance evaluation Correct answer.
  2. Requiring the compliance officer to attend more business planning meetings
  3. Increasing the frequency of internal compliance self-assessments
  4. Adding a second compliance officer to the same reporting structure

Explanation

Independence is strengthened when the compliance function has a direct reporting channel to the board or its committee and when that body influences budgeting and performance evaluation. This reduces the business line's ability to pressure or penalize compliance decisions.

Question 31Deposit Regulations and Consumer Protection

Under the FDIC's deposit insurance rules, what is the standard maximum deposit insurance amount per depositor, per insured bank, for each account ownership category?

  1. $100,000
  2. $500,000
  3. $1,000,000
  4. $250,000 Correct answer.

Explanation

The FDIC insures deposits up to $250,000 per depositor, per insured depository institution, for each account ownership category. This standard limit has applied since the Dodd-Frank Act permanently raised it in 2010. Amounts above the limit in a single ownership category at one bank are uninsured.

Question 32Deposit Regulations and Consumer Protection

A depositor holds a single-owner account with $250,000 and a POD (payable-on-death) account naming one beneficiary with $250,000 at the same bank. How does the FDIC treat the coverage?

  1. Neither account is insured because the total exceeds $250,000
  2. Only the POD account is insured because beneficiaries take priority
  3. The single-owner account is insured up to $250,000 and the POD account is separately insured up to $250,000 for the beneficiary Correct answer.
  4. Both accounts are combined and only $250,000 is insured total

Explanation

Single-owner accounts and POD/revocable trust accounts fall into different ownership categories, so each is insured separately up to $250,000 per depositor. The POD account coverage is based on the named beneficiary. Combining them into one $250,000 limit is incorrect.

Question 33Deposit Regulations and Consumer Protection

Which federal statute is the primary law governing deposit insurance coverage and the FDIC's authority over insured depository institutions?

  1. The Fair Credit Reporting Act
  2. The Truth in Lending Act
  3. The Federal Deposit Insurance Act Correct answer.
  4. The Bank Secrecy Act

Explanation

The Federal Deposit Insurance Act (FDI Act) establishes the FDIC, defines insured deposits, and sets the framework for deposit insurance coverage and receivership. The other statutes address lending disclosure, credit reporting, and anti-money-laundering reporting rather than deposit insurance.

Question 34Deposit Regulations and Consumer Protection

Under Regulation DD (Truth in Savings), when must a bank provide account disclosures to a consumer opening a new deposit account?

  1. Before the account is opened, or no later than when the account is opened Correct answer.
  2. Only after the first statement cycle closes
  3. Only upon the consumer's written request
  4. Within 30 days after the first deposit is credited

Explanation

Regulation DD requires depository institutions to give required account disclosures before the consumer opens the account, or at the latest when the account is opened. Delaying disclosure until after opening or until a statement issues would violate the timing rule.

Question 35Deposit Regulations and Consumer Protection

A bank advertises a savings account using the term 'APY.' Under Regulation DD, what must the advertisement disclose if it states the APY?

  1. The APY must be disclosed only in the account agreement
  2. The APY may be shown only as a dollar figure
  3. The APY must be stated as a percentage and rounded to the nearest tenth of a percent Correct answer.
  4. The APY may be omitted if the interest rate is shown

Explanation

Regulation DD requires that when an advertisement states a rate, the annual percentage yield be stated as a percentage and rounded to the nearest one-tenth of one percent. The APY reflects the effect of compounding, unlike a simple interest rate. Advertisements must not mislead consumers about the yield they can earn.

Question 36Deposit Regulations and Consumer Protection

Under Regulation DD, which event requires a bank to provide an advance notice of a change in account terms?

  1. A change in the balance required to obtain the advertised APY Correct answer.
  2. A change in the bank's mailing address
  3. An increase in a fee that was disclosed to the consumer
  4. A change in the interest rate on a variable-rate account

Explanation

Regulation DD requires advance notice of changes in terms that would adversely affect the consumer, including changes to minimum balance requirements that affect the APY. Variable interest rate changes and certain fee increases described in the rule are exempt from advance notice. Changes to administrative details like a mailing address do not require advance notice.

Question 37Deposit Regulations and Consumer Protection

Under the Expedited Funds Availability Act and Regulation CC, what is the general maximum hold a bank may place on a local check deposited into a transaction account for next-day availability funds?

  1. Five business days
  2. Seven business days
  3. One business day
  4. Two business days Correct answer.

Explanation

Regulation CC generally requires that local checks be made available for withdrawal no later than the second business day after deposit. Cash deposits and certain other items have shorter availability requirements. Exceptions permit longer holds only in defined circumstances.

Question 38Deposit Regulations and Consumer Protection

A customer deposits a check at a branch and asks when the funds must be available. Under Regulation CC, which category of deposit generally must be made available for withdrawal on the business day after deposit?

  1. A cash deposit made in person to a bank employee Correct answer.
  2. A check drawn on a nonlocal bank
  3. A check drawn on a local bank
  4. A check deposited at an ATM

Explanation

Cash deposits made in person to a bank employee must generally be available for withdrawal by the business day after the deposit day. Local checks have a two-day standard, and ATM deposits may be subject to additional delays. Nonlocal check rules were largely unified with local check rules under later amendments.

Question 39Deposit Regulations and Consumer Protection

Under Regulation CC, what is the maximum amount of a deposit that a bank may subject to a large-deposit exception hold?

  1. Any amount over $100
  2. Any amount over $1,000
  3. Any amount over $25,000
  4. Any amount over $5,000 Correct answer.

Explanation

Regulation CC permits an exception hold for the amount of deposits exceeding $5,000 in a single day, allowing the bank additional time to make those funds available. Amounts at or below the threshold must follow standard availability. The exception must be invoked in accordance with the regulation's notice requirements.

Question 40Deposit Regulations and Consumer Protection

A bank places an exception hold on a deposit. Under Regulation CC, what must the bank provide the depositor?

  1. A written notice of the exception, including the reason and the time when funds will be available Correct answer.
  2. No notice, because exception holds are discretionary
  3. Only an oral statement at the time of deposit
  4. A notice only if the deposit exceeds $10,000

Explanation

When a bank invokes an exception hold, Regulation CC requires a notice to the depositor stating the reason for the exception and the time period when the funds will be available. The notice must be given in the manner and timing the regulation prescribes. Oral notice alone does not satisfy the requirement.

Question 41Deposit Regulations and Consumer Protection

Under the Electronic Fund Transfer Act and Regulation E, which of the following best describes a consumer's liability for unauthorized transfers if the consumer notifies the financial institution within two business days after learning of the loss or theft of an access device?

  1. Unlimited liability for all transfers
  2. Up to $50 Correct answer.
  3. No liability under any circumstance
  4. Up to $500

Explanation

Regulation E limits a consumer's liability to $50 if the consumer notifies the institution within two business days of learning of the loss or theft of an access device. If the consumer fails to notify promptly, liability can rise to $500. Unlimited liability applies only when the consumer fails to report unauthorized transfers shown on a statement within the required period.

Question 42Deposit Regulations and Consumer Protection

A consumer reports an unauthorized electronic fund transfer 45 days after the financial institution sent a statement showing the transfer. What is the consumer's maximum liability under Regulation E?

  1. $50
  2. $500
  3. Zero, because the transfer was unauthorized
  4. Unlimited, because the consumer failed to report within 60 days of the statement Correct answer.

Explanation

Under Regulation E, if the consumer fails to report an unauthorized transfer within 60 days after the institution sends a statement showing the transfer, the consumer's liability is not capped and may be unlimited for transfers occurring after the 60-day period. Timely reporting preserves the $50 or $500 caps. A 45-day delay here falls within the 60-day window, so the analysis of the 60-day rule matters for subsequent transfers.

Question 43Deposit Regulations and Consumer Protection

Under Regulation E, how quickly must a financial institution investigate and resolve a consumer's claim of an electronic fund transfer error if it does not provisionally credit the account?

  1. Within 30 business days of receiving the notice
  2. Within 90 business days of receiving the notice
  3. Within 10 business days of receiving the notice Correct answer.
  4. Within 45 business days of receiving the notice

Explanation

Regulation E generally requires the institution to investigate and determine whether an error occurred within 10 business days of receiving notice. If it cannot complete the investigation in that time, it may extend the period to 45 days only if it provisionally credits the consumer's account. Failing to resolve or provisionally credit within 10 business days violates the rule.

Question 44Deposit Regulations and Consumer Protection

A bank wants to impose a fee for an overdraft on an ATM withdrawal and a one-time debit card transaction. Under Regulation E, what is required before the bank may charge such fees?

  1. The bank may charge the fee only on ATM withdrawals, not debit card transactions
  2. The consumer must affirmatively consent (opt in) after receiving the required notice Correct answer.
  3. The bank may charge the fee automatically as long as it is disclosed in the account agreement
  4. The bank may charge the fee only if the consumer's balance is negative by more than $100

Explanation

Regulation E requires that consumers affirmatively consent, or opt in, to overdraft services for ATM and one-time debit card transactions before fees may be charged. The institution must provide a notice explaining the service and the fees, and obtain the consumer's consent. Without opt-in, the institution cannot assess overdraft fees on those transactions.

Question 45Deposit Regulations and Consumer Protection

Under the Truth in Savings Act, which of the following must be disclosed in a periodic statement for a deposit account?

  1. The bank's routing number
  2. The names of the bank's officers
  3. The bank's quarterly earnings
  4. The annual percentage yield earned and the amount of interest earned during the statement period Correct answer.

Explanation

Regulation DD requires periodic statements to disclose the annual percentage yield earned, the amount of interest earned, fees imposed, and the number of days in the statement period. These disclosures let consumers compare actual returns. Information about bank earnings or personnel is unrelated to the required deposit disclosures.

Question 46Deposit Regulations and Consumer Protection

A bank offers a promotional rate on a certificate of deposit. Under Regulation DD, what must the advertisement disclose about the promotional rate?

  1. The bank's total assets
  2. The names of the bank's regulators
  3. The number of branches the bank operates
  4. The time period during which the promotional rate will apply Correct answer.

Explanation

When an advertisement states a promotional or introductory rate, Regulation DD requires disclosure of the time period during which that rate will be in effect. This prevents consumers from assuming the promotional rate is permanent. The other items are unrelated to the required advertising disclosures.

Question 47Deposit Regulations and Consumer Protection

Under the Community Reinvestment Act, what is the primary purpose of the law?

  1. To regulate the issuance of credit cards
  2. To require deposit insurance for all accounts
  3. To set maximum interest rates on consumer loans
  4. To encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods Correct answer.

Explanation

The Community Reinvestment Act encourages banks and thrifts to meet the credit needs of their entire communities, including low- and moderate-income areas, consistent with safe and sound operations. Regulators examine institutions' CRA performance. The Act does not set interest rate caps, mandate deposit insurance, or govern credit card issuance.

Question 48Deposit Regulations and Consumer Protection

Under the Right to Financial Privacy Act, when may a federal agency obtain a customer's financial records from a bank without the customer's consent?

  1. Only if the customer has an account balance above $10,000
  2. Only by complying with the Act's procedures, such as a subpoena, summons, or formal written request with notice to the customer Correct answer.
  3. Whenever the agency believes the records are relevant
  4. Only if the bank's board of directors approves

Explanation

The Right to Financial Privacy Act requires federal agencies to follow specific procedures, such as an administrative subpoena, summons, or formal written request, and generally to notify the customer, before obtaining financial records. The Act protects customers from unrestricted government access to bank records. Agency belief alone or bank board approval does not substitute for the statutory process.

Question 49Deposit Regulations and Consumer Protection

Under the Gramm-Leach-Bliley Act, what must a financial institution provide to consumers regarding its privacy practices?

  1. A list of all employees with access to accounts
  2. A copy of its annual report
  3. A clear and conspicuous initial privacy notice and an opt-out opportunity before sharing nonpublic personal information with nonaffiliated third parties, subject to exceptions Correct answer.
  4. A statement of its capital ratio

Explanation

The Gramm-Leach-Bliley Act requires financial institutions to give consumers a clear and conspicuous privacy notice and, in many cases, a reasonable opportunity to opt out before disclosing nonpublic personal information to nonaffiliated third parties. Certain exceptions, such as disclosures required by law, apply. Annual report copies, employee lists, and capital ratios are not the privacy notice required by the Act.

Question 50Deposit Regulations and Consumer Protection

A bank changes the method it uses to calculate interest on a savings account in a way that reduces the consumer's yield. Under Regulation DD, what must the bank generally do?

  1. Make the change without notice because interest methods are internal
  2. Notify consumers only after the next statement
  3. Provide advance written notice at least 30 days before the change takes effect Correct answer.
  4. Notify only consumers who request information

Explanation

Regulation DD generally requires at least 30 days' advance written notice of a change in terms that adversely affects the consumer, such as a change in the interest calculation method that reduces yield. Post-statement notice or no notice would not satisfy the requirement. The notice lets consumers decide whether to keep the account.