CCM Credit Law and Regulations 3 — Questions and Answers
Question 1: Under the Fair Debt Collection Practices Act (FDCPA), which entity is primarily regulated by the statute?
- Original creditors collecting their own debts
- Third-party debt collectors (Correct answer)
- Commercial banks extending credit
- All businesses that extend credit terms
Correct answer: Third-party debt collectors
The FDCPA primarily regulates third-party debt collectors, not original creditors collecting their own consumer debts.
Question 2: A creditor who sold goods on credit discovers the buyer committed fraud in obtaining the credit. Under the UCC, the seller may seek to:
- Reclaim the goods if demand is made within 10 days of delivery
- Reclaim the goods if demand is made within a reasonable time, generally 10 days (Correct answer)
- File a RICO claim without further notice
- Immediately garnish the buyer's bank accounts
Correct answer: Reclaim the goods if demand is made within a reasonable time, generally 10 days
UCC § 2-702 allows a seller to reclaim goods sold on credit if the buyer was insolvent and the seller demands return within a reasonable time, with 10 days as a statutory guideline.
Question 3: Which of the following best describes a 'preference payment' in the context of bankruptcy law?
- A payment made to a creditor more than 90 days before filing that favors that creditor
- A payment made to a creditor within 90 days before bankruptcy that improves their position over other creditors (Correct answer)
- Interest payments that exceed the statutory maximum
- Any payment made to a secured creditor after default
Correct answer: A payment made to a creditor within 90 days before bankruptcy that improves their position over other creditors
A preference is a payment made to a creditor within 90 days before bankruptcy (one year for insiders) that allows that creditor to receive more than they would in a Chapter 7 liquidation.
Question 4: The concept of 'piercing the corporate veil' in credit law allows a creditor to:
- Access a corporation's confidential financial records
- Hold shareholders or officers personally liable for corporate debts (Correct answer)
- Seize assets of a parent company for subsidiary debts automatically
- Convert unsecured debt to secured debt by court order
Correct answer: Hold shareholders or officers personally liable for corporate debts
Piercing the corporate veil is an equitable remedy that holds shareholders or officers personally liable when the corporate form is abused to perpetrate fraud or injustice.
Question 5: Under the Bankruptcy Code, a Chapter 7 trustee has the power to avoid which type of transaction?
- Only fraudulent transfers made more than 2 years before filing
- Fraudulent conveyances made within 2 years before filing with actual or constructive fraud (Correct answer)
- All transfers made within 5 years of the bankruptcy filing
- Only transfers involving real property
Correct answer: Fraudulent conveyances made within 2 years before filing with actual or constructive fraud
Under 11 U.S.C. § 548, a trustee may avoid fraudulent transfers made within 2 years before filing if made with actual fraudulent intent or for less than reasonably equivalent value.
Question 6: A 'dragnet clause' in a security agreement is designed to:
- Allow repossession without prior notice
- Extend the collateral to cover all present and future debts owed by the debtor (Correct answer)
- Grant the creditor the right to sell collateral at private sale
- Require the debtor to maintain insurance on the collateral
Correct answer: Extend the collateral to cover all present and future debts owed by the debtor
A dragnet (or anaconda) clause in a security agreement extends the collateral's coverage to secure all current and future obligations the debtor owes the secured party.
Question 7: Which federal agency is primarily responsible for enforcing the Equal Credit Opportunity Act (ECOA) for commercial lenders?
- Federal Trade Commission (FTC)
- Consumer Financial Protection Bureau (CFPB) (Correct answer)
- Office of the Comptroller of the Currency (OCC)
- Federal Reserve Board
Correct answer: Consumer Financial Protection Bureau (CFPB)
The CFPB has primary enforcement authority over ECOA, including its application to commercial credit under Regulation B.
CCM Credit Law and Regulations 3
Under the Fair Debt Collection Practices Act (FDCPA), which entity is primarily regulated by the statute?