DMV DMV - Representative Consumer Protection and Dispute Resolution 2 — Questions and Answers
Question 1: If a buyer signed a contract under economic duress or fraudulent misrepresentation, which legal remedy allows them to cancel the contract and be restored to their original position?
- Reformation
- Rescission (Correct answer)
- Novation
- Accord and satisfaction
Correct answer: Rescission
Rescission cancels a contract and restores both parties to their pre-contract positions, and it is available when a contract was induced by fraud or duress.
Question 2: Under the FTC's Holder Rule, if a buyer finances a vehicle purchase through dealer-arranged financing, their claims against the dealer:
- Are waived upon signing the contract
- Can also be asserted against the assignee finance company (Correct answer)
- Must be resolved in arbitration only
- Are limited to warranty claims
Correct answer: Can also be asserted against the assignee finance company
The FTC Holder Rule requires that any holder of a consumer credit contract (assignee finance company) be subject to the same claims and defenses the buyer has against the dealer.
Question 3: A California dealer who charges a buyer more than the advertised price for a vehicle is in violation of:
- The Magnuson-Moss Warranty Act
- California Vehicle Code Section 11713.1(a) (Correct answer)
- The Federal Truth in Lending Act
- The Robinson-Patman Act
Correct answer: California Vehicle Code Section 11713.1(a)
CVC 11713.1(a) prohibits a licensed dealer from selling a vehicle at a price higher than the advertised price.
Question 4: A 'cooling-off period' that allows a buyer to cancel a vehicle sale typically applies to which type of transaction in California?
- All new vehicle purchases
- All used vehicle purchases
- Vehicle sales conducted away from the dealer's lot (e.g., off-premises sales) (Correct answer)
- Vehicle leases only
Correct answer: Vehicle sales conducted away from the dealer's lot (e.g., off-premises sales)
California's 3-day right to cancel under the Home Solicitation Sales Act applies to sales made away from the seller's regular place of business, not typical dealership sales.
Question 5: The Truth in Lending Act (TILA) requires dealers arranging financing to disclose the Annual Percentage Rate (APR) and finance charge primarily to:
- The lender before loan approval
- The buyer before the contract is signed (Correct answer)
- The DMV at time of registration
- The California DBO within 30 days
Correct answer: The buyer before the contract is signed
TILA mandates that lenders and dealers disclose the APR, total finance charge, and total payment amount to the consumer before the credit contract is signed.
Question 6: Under California law, what is the maximum document preparation (doc) fee a dealer may charge a buyer?
- $50
- $85 (Correct answer)
- $80
- No maximum — it must only be disclosed
Correct answer: $85
California sets a statutory maximum doc fee that dealers may charge; as of recent regulation, this fee is capped and must reflect actual document preparation costs.
DMV DMV - Representative Consumer Protection and Dispute Resolution 2
If a buyer signed a contract under economic duress or fraudulent misrepresentation, which legal remedy allows them to cancel the contract and be restored to their original position?