Certified Associate Constructor (CAC) - Level I — Questions and Answers

Question 1: Why do subprime auto finance companies typically price contracts at higher rates than prime lenders?

Because subprime vehicles are always newer
Because federal law sets a minimum subprime rate
To offset higher expected default and loss rates (Correct answer)
To avoid having to disclose the APR

Correct answer: To offset higher expected default and loss rates

Higher rates compensate for the greater probability of default and loss among borrowers with weaker credit.

Question 2: Under the Equal Credit Opportunity Act (ECOA), what must a creditor generally provide after denying a credit application?

A refund of any application fee only
A copy of the applicant's full credit file
An adverse action notice stating the principal reasons or the right to request them (Correct answer)
A referral to another lender

Correct answer: An adverse action notice stating the principal reasons or the right to request them

ECOA/Regulation B requires an adverse action notice with specific reasons or notice of the right to obtain them.

Question 3: Which practice best reduces fair lending risk when dealers have discretion to mark up the buy rate?

Cap markups and monitor pricing outcomes across borrower groups (Correct answer)
Apply higher markups to thin-file borrowers only
Let each dealer set unlimited markups
Stop collecting any pricing data

Correct answer: Cap markups and monitor pricing outcomes across borrower groups

Markup caps plus disparity monitoring help detect and limit discriminatory pricing under ECOA.

Question 4: Absent other information, the FDCPA treats which hours as convenient for contacting a consumer?

7 a.m. to 10 p.m.
8 a.m. to 9 p.m. (Correct answer)
9 a.m. to 5 p.m.
8 a.m. to 8 p.m.

Correct answer: 8 a.m. to 9 p.m.

Collectors may assume calls between 8 a.m. and 9 p.m. local time are convenient.

Question 5: During a physical inspection of delivered hardware, an acceptance inspector discovers a dimension that falls outside the specified tolerance. What is the most appropriate immediate action?

Immediately reject the entire shipment without further review
Accept the item and note the deviation in the final report
Request the contractor re-inspect the item internally
Document the nonconformance and issue a discrepancy report for disposition (Correct answer)

Correct answer: Document the nonconformance and issue a discrepancy report for disposition

Documenting the nonconformance and issuing a discrepancy report follows proper procedure, allowing for formal disposition (accept, rework, reject) through the defined process.

Question 6: Under Regulation F, which voicemail content is a 'limited-content message' that is not treated as a communication?

The consumer's name, a request to reply, the caller's name, and a callback number (Correct answer)
The creditor's name and the account balance
A statement that the account will be sent to legal
The amount owed and the due date

Correct answer: The consumer's name, a request to reply, the caller's name, and a callback number

Regulation F defines a limited-content message as one that leaves out debt details and contains only certain items.

Question 7: A test is given to the same group twice, two weeks apart, and the scores are compared. What is being estimated?

Inter-rater reliability
Test-retest reliability (Correct answer)
Content validity
Predictive validity

Correct answer: Test-retest reliability

Test-retest reliability checks how stable scores are over time.

Question 8: During acceptance testing of software, what does 'regression testing' verify?

That new features meet performance benchmarks
That the software handles peak load conditions
That the software meets security penetration standards
That previously passing tests still pass after changes or fixes have been made to the software (Correct answer)

Correct answer: That previously passing tests still pass after changes or fixes have been made to the software

Regression testing confirms that changes to software have not broken previously verified functionality, ensuring stability throughout the development and acceptance process.

Question 9: What document must dealers display on used vehicles offered for sale under the FTC Used Car Rule?

Monroney label
Odometer statement
Certificate of title
Buyers Guide (Correct answer)

Correct answer: Buyers Guide

The Used Car Rule requires a Buyers Guide disclosing warranty or as-is status on used vehicles.

Question 10: Under the SCRA, which is generally required before repossessing a servicemember's vehicle financed before entering active duty?

Approval from the CFPB
A court order (Correct answer)
A 10-day cure notice only
Written permission from the commanding officer

Correct answer: A court order

The SCRA prohibits repossessing property purchased before service without a court order if a deposit or installment was paid before entering service.

Question 11: Which method best assesses an applicant's stability when credit history is limited?

Review time at residence, time on job, and verifiable income (Correct answer)
Use the applicant's age as the deciding factor
Approve based solely on the dealer's recommendation
Rely only on the vehicle's color and model

Correct answer: Review time at residence, time on job, and verifiable income

Residence and employment tenure plus verified income are standard stability indicators for thin-file applicants.

Question 12: Which financial statement shows a company's assets, liabilities, and equity at a single point in time?

Balance sheet (Correct answer)
Income statement
Statement of cash flows
Statement of retained earnings

Correct answer: Balance sheet

The balance sheet is a snapshot of financial position on a specific date.

Question 13: What is the best practice for documenting a customer complaint?

Handle it verbally and leave no record
Log the complaint, acknowledge it, escalate it under policy, and record the resolution (Correct answer)
Tell the customer to submit it to the CFPB instead
Record it only if the customer threatens legal action

Correct answer: Log the complaint, acknowledge it, escalate it under policy, and record the resolution

A complete complaint record shows fair treatment and supports regulatory review.

Question 14: Expected credit loss on a loan is commonly estimated using which formula?

Credit score x loan term x interest rate
Gross income x debt-to-income x term
Probability of default x loss given default x exposure at default (Correct answer)
Down payment x LTV x PTI

Correct answer: Probability of default x loss given default x exposure at default

Expected loss combines how likely default is, how much is lost if it happens, and the balance exposed.

Question 15: What does 'static pool' analysis help an auto finance company understand?

Dealer lot inventory turnover
How loans originated in the same period perform over time (Correct answer)
The daily stock price
Employee payroll costs

Correct answer: How loans originated in the same period perform over time

Static pool analysis tracks a fixed group of loans from a given origination period to measure losses and collections over time.

Question 16: An acceptance inspector notices that a contractor has made an unauthorized engineering change to a deliverable. What is the correct course of action?

Ask the contractor to revert the change before reinspecting
Ignore the change if the deliverable passes all performance tests
Accept the item if it appears functionally adequate
Suspend acceptance, document the unauthorized change, and escalate through the contract administration office (Correct answer)

Correct answer: Suspend acceptance, document the unauthorized change, and escalate through the contract administration office

Unauthorized changes violate contractual requirements; acceptance must be suspended, the change formally documented, and the issue escalated for formal engineering change disposition.

Question 17: Which privacy law requires financial institutions to give customers a notice about how their nonpublic personal information is shared?

Fair Credit Billing Act
Davis-Bacon Act
Gramm-Leach-Bliley Act (Correct answer)
Clayton Act

Correct answer: Gramm-Leach-Bliley Act

GLBA requires privacy notices and safeguards for consumers' nonpublic personal information.

Question 18: Which Truth in Lending Act (TILA) disclosure expresses the cost of credit as a yearly rate?

Amount financed
Annual Percentage Rate (APR) (Correct answer)
Finance charge
Total of payments

Correct answer: Annual Percentage Rate (APR)

The APR is the cost of credit expressed as a yearly rate under Regulation Z.

Question 19: What is essential for effective compliance monitoring?

Consistent documentation and reporting (Correct answer)
Occasional compliance meetings
Casual discussions
Limited record-keeping

Correct answer: Consistent documentation and reporting

Consistent documentation and reporting are essential for effective compliance monitoring. Thorough records provide an auditable trail, demonstrating that the corporation has met its regulatory obligations and followed established procedures. Regular reporting allows management to track compliance performance, identify trends, and address any issues promptly, ensuring accountability and transparency.

Question 20: Which practice best protects customer data when working remotely?

Emailing files to a personal account
Using company-approved secure connections and locking screens when away (Correct answer)
Writing passwords on sticky notes
Using public Wi-Fi without a VPN

Correct answer: Using company-approved secure connections and locking screens when away

Approved secure connections and physical safeguards help meet GLBA Safeguards Rule expectations.

Question 21: A borrower has $2,100 in monthly debt payments (including the new car loan) and $6,000 gross monthly income. What is the debt-to-income (DTI) ratio?

40%
28%
35% (Correct answer)
30%

Correct answer: 35%

DTI = $2,100 / $6,000 = 0.35, or 35%.

Question 22: In indirect auto lending, who originates the retail installment contract with the consumer?

The consumer's bank
The dealer (Correct answer)
The finance company
The state DMV

Correct answer: The dealer

In indirect lending the dealer writes the retail installment contract and then assigns it to a finance company.

Question 23: Which of the following is a key difference between a direct and an indirect auto loan?

Indirect loans cannot be used for used vehicles
Direct loans are always subprime
Direct loans never charge interest
In a direct loan the consumer borrows straight from the lender rather than through the dealer (Correct answer)

Correct answer: In a direct loan the consumer borrows straight from the lender rather than through the dealer

Direct loans are made by the lender to the consumer, while indirect loans are originated by the dealer and assigned.

Question 24: What is the purpose of 'Acceptance Test Traceability' in technical inspection documentation?

To create a billing record for inspection services rendered
To establish a documented link between each contractual requirement and the specific test or inspection that verifies it (Correct answer)
To record the names of all inspectors who worked on the project
To track the physical location of test equipment

Correct answer: To establish a documented link between each contractual requirement and the specific test or inspection that verifies it

Acceptance test traceability ensures every contractual requirement has a corresponding verification activity, preventing gaps in coverage and providing evidence of complete compliance.

Question 25: Which verification technique best confirms residence for a funding stipulation?

A recent utility bill in the applicant's name at the stated address (Correct answer)
The address the applicant typed on the application
A handwritten note from a friend
A business card with the address

Correct answer: A recent utility bill in the applicant's name at the stated address

A recent third-party bill in the applicant's name provides independent proof of residence.

Question 26: Under the FTC Holder Rule, what must a consumer credit contract for a financed vehicle preserve?

The dealer's right to repossess without a court order
The consumer's right to cancel within three business days
The lender's right to accelerate the debt without notice
The consumer's claims and defenses against the seller, assertable against the holder (Correct answer)

Correct answer: The consumer's claims and defenses against the seller, assertable against the holder

The Holder Rule (16 CFR 433) requires a notice letting buyers assert seller-related claims and defenses against any holder of the contract.

Question 27: Under ECOA/Regulation B, how soon must a creditor notify an applicant of action taken on a completed credit application?

Within 60 days
Within 30 days (Correct answer)
Within 10 days
Within 90 days

Correct answer: Within 30 days

Regulation B requires notice of action taken within 30 days after receiving a completed application.

Question 28: Which federal law requires disclosure of the APR and finance charge on a consumer auto contract?

Gramm-Leach-Bliley Act
Truth in Lending Act (Correct answer)
Fair Debt Collection Practices Act
Fair Labor Standards Act

Correct answer: Truth in Lending Act

TILA (Regulation Z) requires clear disclosure of APR, finance charge, amount financed, and total of payments.

Question 29: How many days does a consumer generally have to dispute a debt after receiving the FDCPA validation notice?

30 days (Correct answer)
60 days
10 days
15 days

Correct answer: 30 days

The validation notice gives the consumer 30 days to dispute the debt.

Question 30: A CAC professional identifies a critical defect during inspection. What is the correct immediate action?

Continue processing and document the defect on the final report
Allow the defect if it is below the AQL threshold
Return the item to the supplier without documentation
Quarantine the item and notify the responsible parties before any further processing (Correct answer)

Correct answer: Quarantine the item and notify the responsible parties before any further processing

Critical defects require immediate quarantine and notification to prevent nonconforming items from advancing in the supply chain.

Question 31: Under the E-SIGN Act, what is required before a creditor can provide required disclosures electronically instead of on paper?

A notarized signature from the consumer
The consumer's affirmative consent after receiving required pre-consent disclosures (Correct answer)
Nothing; electronic delivery is always allowed
Approval from the state attorney general

Correct answer: The consumer's affirmative consent after receiving required pre-consent disclosures

E-SIGN requires the consumer's affirmative consent, given in a way that shows they can access the electronic format.

Certified Associate Constructor (CAC) - Level I

The Certified Associate Constructor (CAC) exam, administered by the American Institute of Constructors (AIC), validates entry-level construction management competency across engineering concepts, project management, materials, safety, and communication for professionals entering the construction industry.

Questions

48 min

Time Limit

70%

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