CARS Foundational Concepts & Principles 2 — Questions and Answers
Question 1: Under Article 9 of the UCC, a secured party may repossess collateral after default without judicial process only if they can do so:
- With prior written notice to the debtor
- Without breaching the peace (Correct answer)
- After obtaining a deficiency judgment
- With law enforcement present
Correct answer: Without breaching the peace
UCC Article 9 permits self-help repossession only when it can be accomplished without a breach of the peace.
Question 2: A 'deficiency balance' in asset recovery refers to:
- The amount still owed after the collateral is sold and proceeds applied to the debt (Correct answer)
- The cost of repossession fees charged to the debtor
- The difference between the original loan and the down payment
- The creditor's storage costs minus insurance proceeds
Correct answer: The amount still owed after the collateral is sold and proceeds applied to the debt
A deficiency balance is the remaining debt after collateral sale proceeds are applied to what the debtor owes.
Question 3: Which federal act primarily governs the conduct of third-party debt collectors and affects asset recovery agents when collecting on accounts?
- Truth in Lending Act (TILA)
- Fair Debt Collection Practices Act (FDCPA) (Correct answer)
- Gramm-Leach-Bliley Act (GLBA)
- Equal Credit Opportunity Act (ECOA)
Correct answer: Fair Debt Collection Practices Act (FDCPA)
The FDCPA regulates third-party debt collectors, imposing rules on communication, harassment, and misrepresentation relevant to recovery agents.
Question 4: In asset recovery, 'skip tracing' is best defined as:
- Tracking the vehicle's GPS signal in real time
- Locating a debtor or collateral using investigative research techniques (Correct answer)
- Filing a UCC lien on transferred collateral
- Reporting a vehicle as stolen to law enforcement
Correct answer: Locating a debtor or collateral using investigative research techniques
Skip tracing is the investigative process of locating a debtor or collateral through public records, databases, and other sources.
Question 5: A creditor's right to 'strict foreclosure' under UCC Article 9 allows the secured party to:
- Sell the collateral at a private sale without notice
- Retain the collateral in full satisfaction of the debt (Correct answer)
- Report the collateral as stolen if not returned voluntarily
- Pursue the debtor's wages without a court order
Correct answer: Retain the collateral in full satisfaction of the debt
Strict foreclosure under UCC 9-620 allows a secured party to retain collateral as full satisfaction of the debt, subject to debtor consent and other conditions.
Question 6: Which of the following best describes 'constructive possession' in an asset recovery context?
- Physically holding the vehicle keys at the repo site
- Having legal control over collateral even without physical custody (Correct answer)
- Filing a police report asserting ownership rights
- Receiving a court order authorizing repossession
Correct answer: Having legal control over collateral even without physical custody
Constructive possession means having legal dominion or control over property even without physical custody of it.
Question 7: Under the UCC, after repossession the secured party must provide notice of a private sale at least how many days in advance to the debtor?
- 3 days
- 7 days
- 10 days (Correct answer)
- 21 days
Correct answer: 10 days
UCC Article 9-611 requires that notice of a private disposition be sent at least 10 days before the sale to be considered commercially reasonable.
CARS Foundational Concepts & Principles 2
Under Article 9 of the UCC, a secured party may repossess collateral after default without judicial process only if they can do so: