Chapter 4: Consumer Lending

Which is NOT a party to indirect lending?

• Consumer

• Dealer

• Consultant

• Bank

Answer explanation

Consumer: person seeking loan

Dealer: intermediary between the consumer and bank

Bank: purchases the loan

Who is NOT subject to Regulation O?

• Employee

• Executive Officer

• Principal Shareholder

• Director

Answer explanation

Regulation O prohibits preferential lending treatment for insiders of banks. This includes overdrafts, board approval for loans, and insider lending limits

Choose the advantages of indirect lending for banks:

• increased loan volume

• reduced workload

• additional bank services are sold

• potential for recourse

True or false: Indirect lending has fewer regulatory requirements than direct lending.

• True

• False

True or false: An example of indirect lending is when a consumer reaches out to multiple institutions to find the most advantageous deal, regardless of their current banking relationship.

• True

• False

Answer explanation

Since the CONSUMER is reaching out, this would still be considered direct lending, regardless of whether the borrower has a prior banking history with the subject bank.