1. The best indicator of whether a credit applicant is likely to repay a new debt in full and in a timely manner is
a. income
b. income and assets
c. credit history
d. net worth

    -recall CCCS examples of people who made a lot of money but still deep in debt
    -where do creditors get that information?

2. True or False: A "credit bureau" or "credit reporting agency" is a business that provides information to prospective creditors based on its own experiences with applicants in prior credit transactions.

    -CRA's provide information obtained from third parties; it's not their own experience
    -if you apply for a loan, and the bank contacts your credit card issuer to find out whether you pay your bills on time, it's not acting as a CRA and not covered by the law

3. Which of the following (was)(were) (a) problem(s) encountered by consumers in the credit-granting process that led to passage of the federal Fair Credit Reporting Act (FCRA)?
a. inaccurate and/or out-of-date information appeared in their reports
b. there were no restrictions on who had access to consumers' reports
c. consumers didn't know what was in their reports or whether they were denied credit based on information in their reports
d. all of the above

4. The specific purpose(s) of the federal FCRA (was)(were)
a. to assure the accuracy of information in consumers' credit reports
b. to assure the privacy of the information in consumers' credit reports
c. both of the above
d. neither of the above; the purpose of the Act was to prevent discrimination in credit granting

    -privacy is an issue, moreso now due to prevalence of identity theft
    -examples of accuracy issues (in lecture notes)
       -Eric Nichols' case
       -my $87k loan
       -Norwich/TRW (now Experian) case

5. True or false: After being fired (impeached?) from his current job, George is applying for a job as a batboy with the Texas Rangers. The Rangers hire a detective agency to interview some of his neighbors to ask questions about rumored "raves" taking place at George's ranch. The detective's report to the Rangers is considered a "consumer report" and is covered by the FCRA.

    -see sec. 1 of lecture notes
    -it's an inevestigative consumer report, covered by FCRA (though much less common)

6. The FCRA creates obligations for which of the following entities?
a. the business that issued the credit report (the credit bureau or agency)
b. the business that uses the report (the creditor)
c. the business that provided the information about the consumer to the credit bureau
d. all of the above

    -three parties have obligations under the law:
       -issuer of the report (cra)
       -user of the report (prospective creditor/employer/insurer)
       -furnisher of the information (current creditor; employer; landlord; debt collector)

7. Which [there may be more than one] of the following (is)(are) true about the responsibilities of the issuer of the credit report under the FCRA?
a. it is liable to the consumer for any inaccuracies that appear in a report, regardless of negligence (not a no-fault law; only liable if negligent; doesn't establish procedures)
b. it has no obligation to delete information, regardless of its age (note time limits in sec. 3 of notes)
c. it must provide consumers with a free copy of their report any time they apply for credit (once a year)
d. it must investigate any time a consumer disputes the accuracy of information in his or her report, unless the request is frivolous
e. it must delete information whose accuracy is challenged by the consumer if the business is unable to verify its accuracy (burden on business)
f.  it must allow the consumer to add a statement to his or her file explaining any dispute
g. if information is deleted from a report, it must send a corrected report to prior recipients of the report within the previous 5 years (2 years for employment; 6 mos. for other)

8. Which of the following (is)(are) true about the responsibilities of the user of the credit report under the FCRA, where credit, insurance or employment is denied due wholly or in part to information in a credit report?
a. it must inform the consumer that he or she was denied due to the report
b. it must provide the consumer with the name and address of the credit bureau that issued the report
c. it must inform the consumer of his or her right to obtain a copy of the report and dispute inaccurate information in it
d. all of the above

Questions 9-18 relate to the opinion of the U.S. Court of Appeals in Pinner v. Schmidt

19. What does a "credit repair organization" (CRO) do?

    -for a fee, will "fix" your credit so you can qualify for a loan

20. What makes the CRO's guaranteed offer inherently suspect and perhaps impossible to perform?

    -under the law, if the information is accurate and current, no basis to delete it
    -thus really can't guarantee to "fix" someone's credit

21. The FTC's Telemarketing Sales Rule (TSR)
a. specifically outlaws CRO's
b. as a practical matter, makes CRO activity impossible
c. specifically prohibits CRO's from using telemarketing
d. as a practical matter, makes CRO use of telemarketing impossible

    -what does that mean?
    -in a TM transaction, Rule prohibits collection of fee until six months AFTER credit has been "fixed"
    -since most CRO's operated using TM, it put most of them out of business

22. The Credit Repair Organizations Act (CROA)
a. allows consumers to cancel CRO contracts within 5 business days
b. prohibits CRO's from charging for services until after they have been performed
c. prohibits CRO's from charging for services until after they have been performed in telemarketed transactions
d. outlaws CRO's

    -this law went further than FTC Rule because it isn't limited to TM transactions

23. What is "prescreening? (You're going to have to do some research outside the class notes for this one; try googling "prescreening credit")

    -see definition in file (FDIC document)
    -note that it is considered a consumer report (covered by the law)
    -go to sample report in sec. 2 of lecture notes; click on box
       -note that such inquiries are identified as such so won't negatively affect consumer's credit standing