Discuss American Bankers Association CRCM Exam Topic 4 Question 129

Mills Company, Inc., is a manufacturing company with a working capital line of credit from First National Bank. The credit agreement governing the loan states that Mills cannot obtain additional unsecured credit without the approval of the bank. Mills believes that such a clause violates the Bank Holding Company Act's anti-tying clause. Does it?

AYes. It is a restraint of trade.

BYes, unless the bank will reasonably allow additional credit at Mills's request.

CNo, since this clause relates to the soundness of the credit

DNo, unless the bank refuses to grant additional credit to Mills itself

Suggested Answer: C

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21 comments · newest first

Tracey 2 days ago

D seems right. The bank must grant credit if asked.

Eric 7 days ago

C makes sense. It's about credit soundness.

Carla 12 days ago

I lean towards B. The bank should be reasonable.

Hollis 18 days ago

I think it's A. Restraint of trade is a big deal.

Paul 23 days ago

D) could be a loophole. What if they just refuse?

Elfriede 28 days ago

C) is solid. Protecting credit soundness is key.

Tamesha 1 month ago

B) is fair. Banks should allow flexibility.

Mertie 1 month ago

I lean towards A). It feels like a restraint of trade.

Melynda 1 month ago

D) is tricky. If the bank denies credit, then it’s a problem.

Latanya 2 months ago

C) seems valid too. The clause is about credit soundness.

Genevieve 2 months ago

I agree, but B) could work if the bank is reasonable.

France 2 months ago

I think it violates the anti-tying clause. A) makes sense.

Odelia 2 months ago

Not sure, but I think it’s more about the bank’s risk management.

Ilene 2 months ago

Totally agree, it feels like a restraint of trade to me!

Renea 2 months ago

Wait, can they really restrict unsecured credit like that?

Kristal 3 months ago

I think it’s fine as long as the bank is reasonable about it.

Ernie 3 months ago

Sounds like a classic case of tying arrangements.

Celestina 3 months ago

I'm a bit confused about the implications of the bank's approval. Does that mean they could deny credit arbitrarily? I think that could relate to option B.

Kendra 3 months ago

I lean towards option C because it seems like the clause is more about protecting the bank's interests rather than restricting trade.

Lorriane 3 months ago

This question feels familiar! I think we practiced a similar scenario where the bank's control over additional credit was a key issue.

Wai 4 months ago

I remember discussing the anti-tying clause in class, but I'm not entirely sure how it applies here. Is it really a restraint of trade?

American Bankers Association CRCM Exam - Topic 4 Question 129 Discussion