AFIP Credit and Lending Fundamentals Flashcards
6 cards from real AFIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AFIP Credit and Lending Fundamentals flashcards as text
Which federal act requires lenders to provide borrowers with a copy of their credit report if adverse action is taken based on that report?
Answer: Fair Credit Reporting Act (FCRA)
The FCRA requires that when a lender takes adverse action based on a credit report, the consumer must be notified and provided with the name of the reporting agency.
In an installment loan, what does 'amortization' refer to?
Answer: The gradual repayment of a loan through scheduled principal and interest payments
Amortization is the process by which a loan is paid off over time through regular payments that cover both principal reduction and interest charges.
What is the primary purpose of a 'Red Flags Rule' compliance program in a dealership's F&I department?
Answer: To detect and prevent identity theft in credit transactions
The Red Flags Rule (under FACTA) requires financial institutions and creditors, including auto dealers, to implement programs to detect and respond to identity theft warning signs.
What does a 'balloon payment' loan structure mean for the borrower?
Answer: A large lump-sum payment is due at the end of the loan term
A balloon payment loan has lower regular payments during the term, followed by a large final payment that covers the remaining principal balance.
Which document in an auto finance transaction outlines the specific terms of the loan, including interest rate, payment schedule, and borrower obligations?
Answer: The retail installment sales contract (RISC)
The Retail Installment Sales Contract (RISC) is the binding legal document that specifies all loan terms, including APR, payment amounts, total finance charge, and borrower obligations.
Under TILA, what must be disclosed as the 'finance charge' in a consumer credit transaction?
Answer: The total dollar cost of credit, including interest and certain fees
TILA defines the finance charge as the total cost of credit expressed in dollars, encompassing interest plus certain fees that are conditions of obtaining credit.