Which of the following represents a major consumer protection adopted in the Dodd-Frank Act?

Which of the following represents a major consumer protection adopted in the Dodd-Frank Act?

• A. No refinance note rate can be set above 2% of the underlying loan
• B. No loan will be made without the determination of the borrower's ability to repay
• C. Lenders are required to offer three different loan types to all consumers
• D. Credit scoring is not an accurate measure of a consumer's performance and is disallowed in the credit evaluation

Answer: (B)

Ability-to-Repay protections are the key idea here. The Dodd-Frank Act requires lenders to make a reasonable, good-faith determination that a borrower has the ability to repay a loan before extending credit, considering factors like verified income or assets, employment, debt obligations, and the expected monthly payment. This is exactly what the option states, making it the best answer because it reflects the protective standard designed to prevent unaffordable loans and reduce the risk of default. The other options don’t reflect this protection: there isn’t a universal 2% cap on refinance rates under Dodd-Frank; lenders aren’t required to offer three different loan types to all consumers; and while credit scoring can be used as part of the evaluation, it isn’t disallowed—credit scores are simply one factor among many in assessing ability to repay.

Ability-to-Repay protections are the key idea here. The Dodd-Frank Act requires lenders to make a reasonable, good-faith determination that a borrower has the ability to repay a loan before extending credit, considering factors like verified income or assets, employment, debt obligations, and the expected monthly payment. This is exactly what the option states, making it the best answer because it reflects the protective standard designed to prevent unaffordable loans and reduce the risk of default.

The other options don’t reflect this protection: there isn’t a universal 2% cap on refinance rates under Dodd-Frank; lenders aren’t required to offer three different loan types to all consumers; and while credit scoring can be used as part of the evaluation, it isn’t disallowed—credit scores are simply one factor among many in assessing ability to repay.