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(True/False): Ignorance of the law will shield you from liability if you are noncompliant. - Correct Answer False (True/False): As an F&l manager working directly with customers, you are individually responsible for your actions and what you say to each customer. - Correct Answer True In a typical credit transaction the (bank)/(dealer) is the creditor. - Correct Answer The dealer is the creditor What is a contract? - Correct Answer A contract is an agreement involving a promise or set of promises that the law enforces or protects. The formation of a contract requires three elements: - Correct Answer 1. Offer 2. Acceptance 3. Consideration An offer consists of three elements: - Correct Answer 1. An expression of a promise or commitment (intent) to enter a contract 2. An expression of definite and certain terms 3. The communication of the offer to the offeree (in this case, the customer) An offer may be terminated by: - Correct Answer 1. An act of the parties 2. The operation of law There are three criteria for the acceptance of an offer: - Correct Answer 1. The offer is accepted by one who is entitled to accept 2. The acceptance takes the proper form and is timely 3. The terms of acceptance reflect closely the terms of the offer and, therefore, do not amount to a counteroffer The Statute of Frauds - Correct Answer Generally requires that all contracts involving the sale of goods for a price of $500 or more be in writing. The Statute of Frauds requires a written contract for the sale of goods for a price of or more. - Correct Answer $500 What is required in order for the parties (the individuals entering into the contract) to have "legal capacity?” - Correct Answer The parties to the contract must be of legal age under the laws of the state in which the contract is written. Criteria that can block the formation of a valid contract: - Correct Answer 1. The need for a written agreement under the Statute of Frauds and certain provisions of the Uniform Commercial Code (U.C.C.) 2. The need for legal capacity of a party to contract 3. The act of fraudulent inducement What is "consideration" as it applies to a contract? - Correct Answer The requirement that each party to the contract receives something of value in exchange for what is given. Finance Charge - Correct Answer The Finance Charge is the resulting dollar amount calculated by applying the Annual Percentage Rate to the Amount Financed over the term of the contract. A(n) clause allows the creditor to declare the entire outstanding balance due and payable. - Correct Answer Acceleration As recorded on an installment sale agreement, the total sale price or deferred contract price would be the total of the . - Correct Answer -Payments -Downpayment -Net Trade-In Which is NOT listed as a mandated TILA box disclosure? - Correct Answer Holder-in-Due Course Notice In most states, the is deemed to be part of the purchase agreement. - Correct Answer Buyer's Guide (True/False) Because the late charges that may be imposed on an installment sale agreement are regulated at the state level, the amount of the late charge is NOT a required disclosure item. - Correct Answer False At the time of consummation, an installment sale contract is between the and the . - Correct Answer Customer, Dealer The Truth in Lending Act and Reg. Z govern installment sale transactions for vehicles purchased for what type(s) of uses? - Correct Answer Personal, Family or Household What is always the largest number on an installment sale agreement? - Correct Answer The total sale price What does "force-placed" or "creditor-placed" mean? - Correct Answer Allows the creditor to force place insurance - that is, buy physical damage insurance to cover the creditor's interest in the vehicle or the creditor's and the buyer's interest in the vehicle if the buyer fails to do so. (True/False) Installment sale agreements notify the customer of the state's laws regarding repossession and how (if applicable) the customer can redeem the vehicle or reinstate the contract. - Correct Answer True How are installment sale contracts regulated? - Correct Answer By federal and state law (True/False) If the vehicle is declared a total loss, the creditor may claim the proceeds from the physical damage insurance. - Correct Answer True Closed-End Credit - Correct Answer A fixed amount of money borrowed for a specified period of time, such as for home mortgages, vehicle purchases and other types of install ment-based financing. Closed-End Credit Terminology (Customer Arranged) - Correct Answer Transaction -- Loan Document -- Note Cost of Credit -- Interest Cost of credit stated as -- APR Parties to the agreement -- Lender- customer Closed-End Credit Terminology (Dealer Arranged) - Correct Answer Transaction -- Credit Sale Document -- Installment Sale Agreement (True/False) In situations in which the customer has the option of purchasing credit insurance (when the lender doesn't require the coverage as a condition of granting the loan), the dollar amount of the premium must be added to the finance charge and computed as part of the APR. - Correct Answer False A dealer may provide TILA and Reg. Z disclosures in any language, but they are required to be made in upon the customer's request. - Correct Answer English Triggering terms on an advertisement for an installment sale - Correct Answer 1) The amount or percentage of any downpayment 2) The number of payments or period of repayment 3) The amount of any payment 4) The amount of any finance charge If any triggering terms are used, an ad must also contain: - Correct Answer -The amount or percentage of the downpayment -The terms of repayment; the number of payments and amount of the payments -The annual percentage rate stated as APR To avoid civil liability, an F&l manager can, within days of discovering the error (and before being sued by the customer for the error), notify the customer of the error and make the necessary adjustments to ensure he will not be required to pay an amount in excess of the charge actually disclosed or the dollar equivalent of the APR actually disclosed, whichever is less. - Correct Answer 60 The criminal penalties for violating TILA and Reg. Z can result in a fine of up to and up to in jail, or both. - Correct Answer $5,000/One year (True/False) While it's up to dealership management, best practices dictate that you document a transaction that doesn't require TILA disclosures as if it did. - Correct Answer True (True/False) TILA and Reg. Z grant consumers the right to rescind a vehicle installment sale contract. - Correct Answer False The total sale price or deferred contract price is the largest number on the installment contract. - Correct Answer Always (True/False) A creditor can claim a bona fide error defense for a violation of TILA or Reg. Z as long as it can prove by a preponderance of evidence that the violation was not intentional and it had maintained procedures reasonably adapted to avoid such an error. - Correct Answer True Are there state laws that require TILA and Reg. Z disclosures, even when the federal government doesn't? - Correct Answer Yes If a customer is re-contracted five days after the original agreement was executed, how should the second agreement be treated? - Correct Answer You should re-contract the transaction as of the date of re-contracting, recalculating all deal terms and disclosures as if the re-contracting were a completely new transaction. According to TILA and Reg. Z, with the exception of rules regarding advertisements, dealers must maintain evidence of the TILA and Reg. Z What truth-in-advertising rules apply to advertisers? - Correct Answer - Advertising must be truthful and non-deceptive -Advertisers must have evidence to back up their claims -Advertisements cannot be unfair What makes an advertisement deceptive? - Correct Answer If an ad contains a statement - or omits information - that: -ls likely to mislead consumers acting reasonably under the circumstances -ls "material" - that is, important to a consumer's decision to buy or use the product What makes an advertisement unfair? - Correct Answer An ad or business practice is unfair if: -It causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid -It is not outweighed by the benefit to consumers What penalties can be imposed against a company that runs a false or deceptive ad? - Correct Answer -Cease and desist orders; and to pay a fine of $16,000 per day per ad if the company violates the law in the future. -Civil penalties, consumer redress and other monetary remedies -Corrective advertising, disclosures and other informational remedies. Lanham Act - Correct Answer Gives companies the right to sue their competitors for making deceptive claims in ads. Bait and Switch - Correct Answer Advertising a product when the company has no intention of selling that item, but instead plans to sell a consumer something else, usually at a higher price. What are the rules on advertising rebates to consumers? - Correct Answer Ads that include rebate promotions should prominently state the before-rebate cost, as well as the amount of the rebate. Gross capitalized cost - Correct Answer The gross capitalized cost represents the agreed-upon value of the vehicle being leased and the cost of any products, services, fees or outstanding balances that will be paid, as part of the monthly lease payments, over the term of the lease. Capitalized cost reduction - Correct Answer Includes any amounts, such as the net value of a trade-in, factory rebate or cash, that reduce the gross capitalized cost. Adjusted capitalized cost - Correct Answer The difference between the amount entered as the gross capitalized cost less the amount posted as the capitalized cost reduction. Residual value - Correct Answer The amount determined at the inception of the lease to be the value of the vehicle at the end of the agreement. The residual value figure is subtracted from the adjusted capitalized cost to determine the amount of depreciation in the value of the vehicle that will occur over the term of the lease. If not included in the amortized amount or gross capitalized cost, property taxes are the responsibility of the and paid . - Correct Answer Lessee, Annually (True/False) The amount due at lease signing does NOT need to be itemized. - Correct Answer False The represents the agreed-upon value of the vehicle being leased and the cost of any products, services, fees or outstanding balances that will be paid as part of the monthly lease payments over the term of the lease. - Correct Answer Gross Capitalized Cost (True/False) Unlike an installment sale agreement, an F&l manager is allowed to record a negative amount on a lease contract in the case of negative equity. - Correct Answer False (True/False) If circumstances require that a second lease agreement be executed - the customer must be re-contracted - the date recorded on the second agreement must be the date of the original contract. - Correct Answer False (True/False) In cases in which the lease is not regulated by the CLA or Reg. M, best practices dictate completing the transaction as if it was governed by the CLA and Reg. M. - Correct Answer True What are the three components of a lease payment? - Correct Answer 1. Depreciation 2. Amortized Amounts 3. Rent Charge You may be able to remedy a violation of the CLA or Reg. M if, within days of discovering an error (and before being sued by the customer for the error), you notify the customer of the error and make the necessary adjustments to the customer's account to assure that the customer will not be required to pay an amount in excess of the charge actually disclosed or the dollar equivalent of the APR actually disclosed, whichever is less. - Correct Answer 60 (True/False) Almost all states have laws that require disclosures above and beyond the disclosures already required by Regulation M that are just as binding as the federal rules. - Correct Answer True What does the following describe? "The amount determined at the inception of the lease to be the value of the vehicle at the end of the agreement.” This figure is subtracted from the adjusted capitalized cost to determine the amount of depreciation in the value of the vehicle that will occur over the term of the lease. - Correct Answer Residual Value (True/False) The CLA and Reg. M disclosures must be made prior to consummation in a form the lessee can keep. - Correct Answer True (True/False) When completing the "Amount Due at Lease Signing or Delivery” section of a lease agreement, it's permissible to enter a single amount that represents the total of the various amounts that will be due and payable when the contract is executed. - Correct Answer False Which act does Regulation M implement? - Correct Answer Consumer Leasing Act The purpose of Regulation Z - Correct Answer To allow people to compare the cost of credit. Are there any defenses to a civil claim for a violation of TILA or Reg. Z? - Correct Answer Yes. 1. "bona fide error" defense; and 2. "safe harbor" Bona fide error defense - Correct Answer A creditor claiming this defense must show by a "preponderance of evidence" that the violation was not intentional and resulted from a bona fide error. (Ex., clerical & calculation errors, computer malfunctions, programming problems and printing errors.) Safe Harbor - Correct Answer If the creditor relied in good faith on "any rule, regulation or interpretation thereof by the Bureau or in conformity with any interpretation or approval by an official or employee of the Federal Reserve System duly authorized by the Bureau to issue such interpretations or approvals under such procedures as the Bureau may prescribe.” The "lessor" is the . - Correct Answer Dealer The "lessee" is the . - Correct Answer Consumer What is the Consumer Leasing Act? - Correct Answer A federal law that requires lessors to make disclosures to consumers about the cost and terms of the leases. Who can change TILA and CLA? - Correct Answer Only Congress has the authority to change TILA and the CLA. What does the FRB and CFPB constitute as an advertisement? - Correct Answer -Messages in a newspaper, magazine, leaflet, flyer or catalog -Radio, TV, or public address system announcements -Internet messages -Direct Mail -Exterior and interior signs -Point-of-sale/lease displays -Telephone solicitations -Price tags with credit/lease information -Letters to customers as part of an organized solicitation of business. What isn't an advertisement according to the FRB and the CFPB? - Correct Answer -Direct personal contacts -Follow-up letters to consumers -Oral or written communications relating to the negotiation of a specific transaction ECOA - Correct Answer Equal Credit Opportunity Act Required TILA disclosures - Correct Answer -APR -Finance Charge -Amount financed -Total selling price or the deferred contract price -Dates of the payments -Amount of payments -- also, the balloon payment, if applicable -Number of payments (If any of the situations occur, an Adverse Action Notice must be issued.) - Correct Answer « The information in a credit report is the basis for denying the customer's credit. * The information provided by a third party, other than a credit reporting agency, such as an employer or landlord, is the basis for denying credit. If the dealership cannot arrange for the requested financing, an Adverse Action Notice must be sent to the customer within days of receipt of the application. - Correct Answer 30 If a counteroffer is deemed to be unacceptable by the customer, the Adverse Action Notice must be sent to the customer within days after delivering the counteroffer. - Correct Answer 90 In the case of incomplete applications (information needed to process the application is missing), if no Adverse Action Notice of Incompleteness is sent, the Notice must be sent to the customer within days of receipt of the incomplete application. - Correct Answer 30 Under the ECOA, documents must be kept on file for months after the dealership notifies the consumer of credit approval, adverse action, or application incompleteness. - Correct Answer 25 What documents must be kept on file under the ECOA, after the dealership notifies the consumer of credit approval, adverse action, or application incompleteness? - Correct Answer « A copy of the credit application * A copy of the credit report * Documents verifying notice to the customer, including notes and computer records showing that the written or oral notice was given * Statements giving the reasons for denying credit, including those cited by the simplified Adverse Action Notice (statements given to the customer or found in internal memoranda) * Any written statements submitted by the customer alleging a violation of the ECOA. (True/False) The changes in dealership practices required by the adverse action reporting rules mandated by the Fair Credit Reporting Act are the result of new legislation enacted by Congress. - Correct Answer False The policy changes required in order to comply with the FCRA are effective: - Correct Answer Immediately According to the FCRA, a dealer must issue an Adverse Action Notice if the request for credit was denied based on: - Correct Answer a. The information provided by a credit reporting agency. b. Information provided by a third party (e.g., an employer or landlord). The adverse action reporting requirements for Notices issued in accordance with the FCRA must contain: - Correct Answer a. A statement that the adverse credit decision was based in whole or in part on information obtained from a credit reporting agency. 
