Certified Regulatory Compliance Manager (CRCM) — Question 252

Roger Jameson is the head of the consumer loan department at First National Bank. He is a regular participant in a lending committee of a local finance trade association. The committee meets once a month at a local hotel. After the committee meetings, Roger and several other committee members who are officers at other banks in town go to a hotel restaurant and talk for a couple of hours before leaving. During these informal conversations Roger learned that the other members require the car dealerships in town that sell consumer installment contracts to the banks to refrain from selling them to local savings and loan associations. Roger believes that this is a good idea and would like to implement it at First National. Is there a problem with doing so?

Answer options

• A. No, because interest rates are not involved.
• B. No, because this decision would have no effect on the cost to the consumer.
• C. Yes, unless there are enough dealerships in town to provide contracts to all of the institutions.
• D. Yes. Restricting the dealerships is a restraint of trade.

Correct answer: D

Explanation

The correct answer is D because restricting dealerships from selling to certain banks creates an illegal restraint of trade, which can lead to anti-competitive practices. Options A and B are incorrect as they overlook the legal implications of such collaborative decisions among competitors. Option C might seem plausible but does not address the legality of the proposed restriction.