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Industry Best Practices Flashcards

7 cards from real CAC practice questions. Tap to flip, then mark Knew It or Still Learning โ€” missed cards come back until you master them.

Read the first 7 Industry Best Practices flashcards as text
  1. Which factor matters most when setting the loan-to-value limit on a used vehicle contract?

    Answer: The vehicle's real market value from a recognized valuation guide

    LTV limits should rest on objective collateral values from sources like J.D. Power or Black Book.

  2. Why do auto lenders often look at payment-to-income (PTI) ratio during underwriting?

    Answer: To judge whether the borrower can afford the monthly payment

    PTI compares the car payment with gross income to measure affordability.

  3. What is a best practice for dealer relationship management at an indirect auto lender?

    Answer: Screen dealers before onboarding and track their portfolio performance and compliance

    Dealer onboarding checks and ongoing monitoring cut fraud, early defaults and compliance risk.

  4. A borrower faces a short-term hardship but has a good payment history. Which loss mitigation option is often best?

    Answer: Offer a payment extension or deferral that follows written policy

    Extensions or deferrals under a consistent policy help qualified borrowers recover and lower losses.

  5. Why should loan modifications and deferrals follow a written, consistently applied policy?

    Answer: To ensure fair treatment and reduce fair lending and UDAAP risk

    Applying the same policy to everyone prevents discrimination and keeps the process clear.

  6. Which metric best shows the early credit quality of a new group of auto loans?

    Answer: First-payment default and early delinquency rates for each vintage

    Vintage analysis of first-payment defaults and early delinquency flags weak underwriting or fraud quickly.

  7. What is the main benefit of a strong compliance management system (CMS) at a finance company?

    Answer: It finds, manages and fixes compliance risks before they hurt consumers

    A CMS combining board oversight, policies, training, monitoring and audits keeps compliance risk under control.