CARS Industry Regulations & Compliance 2 — Questions and Answers
Question 1: Under the Fair Debt Collection Practices Act (FDCPA), which entity is primarily regulated?
- Original creditors collecting their own debts
- Third-party debt collectors (Correct answer)
- Credit reporting agencies
- Bankruptcy trustees
Correct answer: Third-party debt collectors
The FDCPA primarily regulates third-party debt collectors, not original creditors collecting debts owed directly to them.
Question 2: A repossession agent discovers a consumer's vehicle contains personal property at the time of repossession. Under most state laws, the agent must:
- Discard the property immediately to protect the creditor
- Retain the property and notify the consumer of its availability (Correct answer)
- Transfer the property to the creditor without notice
- File a police report before touching any personal items
Correct answer: Retain the property and notify the consumer of its availability
Most state laws require repossession agents to inventory and retain personal property found in a repossessed vehicle and notify the debtor of how to retrieve it.
Question 3: Which federal regulation governs the repossession of vehicles financed through consumer credit agreements, particularly regarding notice requirements?
- Regulation Z (Truth in Lending Act) (Correct answer)
- Regulation B (Equal Credit Opportunity Act)
- Regulation C (Home Mortgage Disclosure Act)
- Regulation E (Electronic Fund Transfer Act)
Correct answer: Regulation Z (Truth in Lending Act)
Regulation Z, implementing the Truth in Lending Act, governs consumer credit agreements including disclosure requirements related to default and repossession.
Question 4: A 'breach of the peace' during a self-help repossession would most likely occur if the repossession agent:
- Repossesses the vehicle from a public street at night
- Uses a key provided by the lienholder to unlock the vehicle
- Proceeds with repossession after the debtor verbally objects (Correct answer)
- Takes the vehicle from an unlocked driveway without contact
Correct answer: Proceeds with repossession after the debtor verbally objects
Continuing a repossession after a debtor verbally objects constitutes a breach of the peace, which can invalidate the repossession and expose the creditor to liability.
Question 5: Under the Gramm-Leach-Bliley Act (GLBA), asset recovery companies must:
- Obtain written consent before repossessing any vehicle
- Protect the nonpublic personal information of consumers (Correct answer)
- Report all repossessions to the Federal Trade Commission
- Conduct a credit check before every skip trace operation
Correct answer: Protect the nonpublic personal information of consumers
The GLBA requires financial institutions and affiliated companies, including asset recovery firms, to safeguard consumers' nonpublic personal information.
Question 6: Which type of license is most commonly required specifically for repossession agents operating under their own authority in most U.S. states?
- General contractor license
- Repossession or collateral recovery license (Correct answer)
- Private investigator license only
- Department of Transportation carrier permit
Correct answer: Repossession or collateral recovery license
Most U.S. states require repossession or collateral recovery agents to hold a specific repossession license separate from a general PI license.
Question 7: When a creditor sells a charged-off account to a debt buyer, the debt buyer's right to collect is derived from:
- A new promissory note signed by the consumer
- An assignment of the original creditor's rights (Correct answer)
- A court judgment obtained before the sale
- Direct authorization from the state attorney general
Correct answer: An assignment of the original creditor's rights
Debt buyers acquire the right to collect through an assignment of the original creditor's rights under the underlying agreement.
CARS Industry Regulations & Compliance 2
Under the Fair Debt Collection Practices Act (FDCPA), which entity is primarily regulated?