Legal & Regulatory Compliance in Credit Management Flashcards

A credit professional is reviewing a personal guarantee signed by a corporate officer. For the guarantee to be enforceable, which element is MOST critical?

Answer: The guarantee must be in writing and signed by the guarantor

Under the Statute of Frauds, a guarantee (promise to pay another's debt) must be in writing and signed by the guarantor to be legally enforceable.

What is the legal concept of 'reclamation' in commercial credit, and when can a seller exercise this right?

Answer: A seller's right to reclaim goods sold on credit when the buyer received them while insolvent

Reclamation under UCC Section 2-702 allows a seller to reclaim goods from an insolvent buyer who received the goods on credit, provided the seller makes a written demand within 10 days of receipt.

Under the Dodd-Frank Act, which agency was created with primary authority to supervise and enforce consumer financial protection laws?

Answer: Consumer Financial Protection Bureau (CFPB)

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created the Consumer Financial Protection Bureau (CFPB) to supervise financial institutions and enforce consumer financial protection laws.

A creditor obtains a court judgment against a debtor. What is the next step to collect on real property the debtor owns?

Answer: Record the judgment as a judgment lien against the debtor's real property in the county records

To attach a judgment to real property, the creditor must record the judgment in the county where the real property is located, creating a judgment lien that encumbers the property.

Which of the following is an example of a fraudulent conveyance that a bankruptcy trustee could challenge?

Answer: A debtor transferring a major asset to a family member for below-market value two years before filing

Transferring assets to insiders for less than fair market value within the look-back period constitutes a fraudulent conveyance, which a bankruptcy trustee can void and recover the property.

What does 'garnishment' allow a judgment creditor to do?

Answer: Collect money owed to the debtor by a third party (such as the debtor's employer or bank)

Garnishment is a legal process allowing a judgment creditor to collect funds from a third party (such as an employer or bank) who owes money to or holds money for the judgment debtor.

Under U.S. anti-money laundering (AML) regulations, what is a Suspicious Activity Report (SAR) and who is required to file one?

Answer: A report filed by financial institutions with FinCEN when they detect transactions that may involve illegal activity

A SAR is a report that financial institutions are legally required to file with the Financial Crimes Enforcement Network (FinCEN) when they identify transactions suspected of involving money laundering or other criminal activity.