CLFP Legal & Regulatory Compliance 2

Question 1

Under ASC 842 (the current FASB lease accounting standard), a lessee is required to recognize right-of-use assets and lease liabilities for:

Accepted Answer

Both finance leases and operating leases

Answer

Finance leases only

Answer

Operating leases only

Answer

Short-term leases with terms under 12 months only

Question 2

The Gramm-Leach-Bliley Act (GLBA) requires equipment lessors meeting the definition of 'financial institution' to:

Accepted Answer

Protect the privacy of consumers' nonpublic personal information and provide privacy notices

Answer

Maintain minimum capital reserves of 8% of total lease portfolio outstanding

Answer

File annual compliance reports with the Federal Trade Commission

Answer

Obtain prior written consent before approving any consumer lease transaction

Question 3

A 'Hell or High Water' clause in an equipment lease agreement means that:

Accepted Answer

The lessee's obligation to make lease payments is unconditional regardless of equipment malfunction, damage, or obsolescence

Answer

The lessor may repossess equipment under any circumstances without prior court approval

Answer

The lessee must maintain the equipment in original condition throughout the entire lease term

Answer

Lease payments will automatically adjust based on prevailing market interest rate changes

Question 4

The Electronic Signatures in Global and National Commerce Act (E-SIGN Act) established that electronic signatures on lease agreements are:

Accepted Answer

Legally valid and enforceable with the same legal effect as handwritten signatures

Answer

Only valid for lease transactions under $100,000 in value

Answer

Permissible only when both parties are located in the same state

Answer

Acceptable only for consumer leases, not commercial equipment transactions

Question 5

Under Dodd-Frank, which equipment leasing transactions are most likely subject to Consumer Financial Protection Bureau (CFPB) oversight?

Accepted Answer

Leases to individual consumers or transactions with consumer-purpose characteristics

Answer

All commercial equipment leases regardless of lessee type or transaction size

Answer

Leases originated exclusively by bank-owned leasing subsidiaries

Answer

Equipment leases exceeding $1 million in total value

Question 6

A 'precautionary UCC filing' is made by a lessor primarily to:

Accepted Answer

Protect the lessor's ownership interest if the lease is later recharacterized as a secured loan by a court

Answer

Notify the state tax authority that a tax-exempt governmental lease has been executed

Answer

Establish the lessor's priority over any equipment manufacturer liens or claims

Answer

Secure a blanket lien on the lessee's other business assets as additional collateral

Question 7

The Fair Credit Reporting Act (FCRA) requires equipment finance companies to provide an 'adverse action notice' when:

Accepted Answer

Credit is denied or offered on less favorable terms based wholly or partly on consumer report information

Answer

An applicant's credit score falls below the company's minimum internal threshold

Answer

A lease application has been pending review for more than 30 business days

Answer

Equipment insurance is required as a mandatory condition of lease approval