Contract Management Flashcards

In indirect auto financing, what typically happens to a retail installment contract after the dealer and consumer sign it?

Answer: The dealer assigns it to a finance company that purchases it

The dealer is the original creditor and assigns the retail installment contract to a finance company or bank that buys it.

Under the Truth in Lending Act, which disclosure must appear on a consumer retail installment contract?

Answer: The Annual Percentage Rate (APR)

TILA and Regulation Z require disclosure of the APR, finance charge, amount financed, and total of payments.

A contract is returned to the dealer because the buyer's signature is missing on the arbitration clause. What is this commonly called?

Answer: A contract stip or funding exception

Missing signatures or documents create funding exceptions that must be cured before the contract is funded.

Which party bears the legal obligation to repay the amount financed on an assigned retail installment contract?

Answer: The consumer buyer

Assignment transfers the creditor's rights, but the buyer remains the obligor on the debt.

What does the FTC Holder Rule require in consumer credit contracts arising from a sale?

Answer: A notice preserving the buyer's claims and defenses against any holder of the contract

The Holder Rule notice lets consumers assert seller-related claims and defenses against the assignee holding the contract.

Which document perfects the lender's security interest in a financed vehicle in most U.S. states?

Answer: Notation of the lienholder on the certificate of title

For titled motor vehicles, most states perfect the security interest by noting the lien on the certificate of title.

A finance company verifies the buyer's employment and residence before funding a contract. What is the main purpose of this step?

Answer: To confirm application accuracy and reduce fraud risk

Verification confirms that stated information is true, protecting against misrepresentation and fraud before funding.