Consumer Protection and Fair Lending
What this domain tests
This domain tests conduct rules that govern the consumer lending lifecycle: fair access, clear disclosures, fair servicing, and prohibitions on unfair, deceptive, or abusive acts or practices. Expect ECOA/Reg B, TILA/Reg Z, RESPA/Reg X, HMDA/Reg C, UDAAP, and fair lending theories.
Core rules and concepts
- ECOA/Reg B prohibits discrimination in credit on prohibited bases and requires adverse action notices. A creditor generally must notify an applicant within 30 days after a completed application.
- TILA/Reg Z requires disclosure of the finance charge and APR, with special rules for high-cost mortgages, escrow, and ability-to-repay.
- RESPA/Reg X requires a Loan Estimate within three business days of application and a Closing Disclosure at least three business days before consummation, with tolerances for changed costs.
- HMDA/Reg C requires collection, reporting, and public availability of mortgage application data.
- UDAAP reaches unfair, deceptive, or abusive acts or practices. Fair lending includes disparate treatment and disparate impact; a neutral policy can still create illegal disparate impact without a legitimate business necessity.
Worked example
A bank sets a minimum loan amount of USD 75,000 for a home improvement product. Data show that applicants in majority-minority census tracts are disproportionately denied because their requested loans are smaller. The policy is facially neutral, but it produces a disparate impact. The bank must show a legitimate business necessity and that no less discriminatory alternative exists. If the bank cannot, it should revise the minimum, add an exception process, and monitor outcomes. The key is not intent alone; effects evidence matters.
Traps that cost marks
- Treating a neutral policy as automatically fair-lending safe.
- Missing the 30-day adverse action timing under Reg B.
- Confusing APR with the note rate; APR includes certain finance charges.
- Overlooking TRID timing and tolerance rules.
- Assuming UDAAP requires proof of intent; unfairness and deception can be found from conduct and likely consumer harm.