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Question 259

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?

    Correct Answer: D

    Restricting car dealerships from selling consumer installment contracts to savings and loan associations constitutes a restraint of trade, which is a violation of antitrust laws. Such practices are considered anticompetitive as they limit market access and reduce competition, thereby harming consumers and the market environment.

Discussion
Cam22Option: D

Implementing an agreement with other banks to restrict car dealerships from selling consumer installment contracts to local savings and loan associations constitutes an anticompetitive practice and violates antitrust laws. Antitrust laws, such as the Sherman Antitrust Act, prohibit agreements among competitors that restrain trade or competition. By agreeing to limit the market access of savings and loan associations, Roger and the other banks would be engaging in anticompetitive behavior.