CAC Compliance and Regulatory Standards 2 — Questions and Answers
Question 1: Under Regulation Z, which disclosure must appear on a retail installment contract for a closed-end auto loan?
- The lender's net profit on the deal
- The Annual Percentage Rate (APR) (Correct answer)
- The dealer's invoice cost of the vehicle
- The consumer's credit score
Correct answer: The Annual Percentage Rate (APR)
TILA/Regulation Z requires closed-end credit disclosures including the APR, finance charge, amount financed, and total of payments.
Question 2: Under the Equal Credit Opportunity Act, how soon must a creditor generally notify an applicant of action taken on a completed application?
- Within 10 days
- Within 60 days
- Within 30 days (Correct answer)
- Within 90 days
Correct answer: Within 30 days
Regulation B requires notice of action taken within 30 days after receiving a completed application.
Question 3: Which of the following is a prohibited basis for credit decisions under ECOA?
- Debt-to-income ratio
- Length of employment
- Receipt of public assistance income (Correct answer)
- Payment history on prior auto loans
Correct answer: Receipt of public assistance income
ECOA prohibits discrimination because all or part of an applicant's income derives from a public assistance program.
Question 4: The FTC Holder Rule requires consumer credit contracts to include a notice that does what?
- Lets the assignee of the contract be subject to claims and defenses the buyer has against the seller (Correct answer)
- Requires the seller to repurchase every contract that defaults
- Caps the APR at 36%
- Lets the buyer cancel within three days
Correct answer: Lets the assignee of the contract be subject to claims and defenses the buyer has against the seller
The Holder Rule preserves the consumer's claims and defenses against any holder of the contract, such as a finance company that bought it from the dealer.
Question 5: Which federal agency has primary supervisory authority over large nonbank auto finance companies for consumer financial protection laws?
- Federal Reserve Board
- Office of the Comptroller of the Currency
- Consumer Financial Protection Bureau (Correct answer)
- Securities and Exchange Commission
Correct answer: Consumer Financial Protection Bureau
The CFPB supervises larger participants in the auto finance market under its larger-participant rule.
Question 6: Under the Fair Credit Reporting Act, which of these is a permissible purpose for pulling a consumer report?
- Marketing to the applicant's neighbors
- Evaluating a credit application the consumer started (Correct answer)
- Checking an ex-customer's finances out of curiosity
- Verifying a competitor's lending terms
Correct answer: Evaluating a credit application the consumer started
FCRA allows access in connection with a credit transaction the consumer initiated.
Question 7: UDAAP authority under the Dodd-Frank Act adds which standard beyond the FTC Act's 'unfair or deceptive'?
- Unreasonable
- Abusive (Correct answer)
- Arbitrary
- Anticompetitive
Correct answer: Abusive
Dodd-Frank prohibits unfair, deceptive, or abusive acts or practices, and 'abusive' is the newer standard.
CAC Compliance and Regulatory Standards 2
Under Regulation Z, which disclosure must appear on a retail installment contract for a closed-end auto loan?