Final answer:
The FCRA defines a 'creditor' as a person or entity that extends, renews, or continues credit, or is involved in credit decisions. In the lending process, creditors assess risk by reviewing borrower income, credit history, and sometimes requiring a cosigner or collateral.
Step-by-step explanation:
The Fair Credit Reporting Act (FCRA) defines a creditor as any person who regularly extends, renews, or continues credit; regularly arranges for the extension, renewal, or continuation of credit; or is an assignee of a person who participates in decisions to extend, rent, or continue credit. Thus, the correct answer to the student's question is a: Creditor.
In the financial capital market, banks and other financial institutions take various measures to assess and mitigate the risks associated with lending. This includes requiring the borrower to provide information about income sources and conducting a credit check to review past borrowing behavior. Additionally, lenders might ask for a cosigner, who is legally obligated to repay the loan if the original borrower fails to do so, or collateral, such as property or equipment, as a security interest that can be seized and sold should the borrower default on the loan.