DMV Vehicle Financing and Credit Practices 2

Question 1

The Equal Credit Opportunity Act (ECOA) prohibits a dealer or lender from discriminating against a credit applicant based on:

Accepted Answer

Race, color, religion, national origin, sex, marital status, or age

Answer

ECOA prohibits credit discrimination based on protected characteristics including race, color, religion, national origin, sex, marital status, and age (provided the applicant has capacity to contract).

Question 2

Under the Fair Credit Reporting Act (FCRA), if a dealer takes an adverse action (denies credit) based on information in a consumer's credit report, the dealer must:

Accepted Answer

Provide the consumer with an adverse action notice including the name of the credit reporting agency used

Answer

FCRA requires that when adverse action is taken based on a credit report, the creditor must provide an adverse action notice identifying the consumer reporting agency whose report was used.

Question 3

What is 'negative equity' in a vehicle financing transaction?

Accepted Answer

When the outstanding loan balance on a trade-in vehicle exceeds its market value

Answer

Negative equity (being 'upside down' or 'underwater') occurs when a buyer owes more on a trade-in vehicle than it is worth, often resulting in that balance being rolled into the new loan.

Question 4

GAP (Guaranteed Asset Protection) insurance or a GAP waiver is primarily designed to protect a buyer against:

Accepted Answer

The difference between the insurance payout and the remaining loan balance if the vehicle is totaled or stolen

Answer

GAP coverage pays the difference between what a standard auto insurance policy pays (actual cash value) and the amount the buyer still owes on their loan if the vehicle is a total loss.

Question 5

Under the FTC's Red Flags Rule, auto dealers who extend credit are required to:

Accepted Answer

Implement a written Identity Theft Prevention Program to detect and respond to warning signs of identity theft

Answer

The FTC's Red Flags Rule requires dealers who are creditors to develop and implement a written Identity Theft Prevention Program that identifies, detects, and responds to 'red flags' indicating potential identity theft.

DMV - Representative Exam Practice Test

DMV - Representative Exam Practice Test

DMV Vehicle Financing and Credit Practices 2