DMV Vehicle Financing and Credit Practices 3

Question 1

A dealer is prohibited from including a 'yo-yo' clause that allows them to unwind a completed vehicle sale unless:

Accepted Answer

The financing was expressly made conditional in writing and disclosed to the buyer at the time of delivery

Answer

To lawfully unwind a deal after delivery, the financing contingency must have been clearly disclosed to the buyer in writing at the time of the sale; otherwise the transaction is considered complete.

Question 2

Under California law, a dealer who offers a vehicle service contract (VSC) to a buyer must disclose that a VSC is:

Accepted Answer

Optional and not required as a condition of the sale or financing

Answer

California law requires dealers to clearly disclose that vehicle service contracts are optional products and cannot be made a condition of the sale or financing approval.

Question 3

If a dealer quotes a customer a monthly payment without disclosing the corresponding interest rate, term, or total amount financed, the dealer may be in violation of:

Accepted Answer

Truth in Lending Act (TILA) requirements for credit advertising and disclosure

Answer

TILA and Regulation Z require that when a payment amount is quoted in an advertisement or disclosure, the APR, term, and amount financed must also be clearly stated.

Question 4

A buyer who finances a vehicle through a dealer-arranged loan has the right to receive a copy of the executed retail installment sale contract:

Accepted Answer

At the time of signing the contract

Answer

The buyer must be provided with a completed, signed copy of the retail installment sale contract at the time of signing, not at some later point.

Question 5

Under the Military Lending Act (MLA), what special protection applies to active-duty service members financing a vehicle?

Accepted Answer

The Military Annual Percentage Rate (MAPR) charged to them cannot exceed 36%

Answer

The Military Lending Act caps the Military Annual Percentage Rate (MAPR) — which includes fees and add-on products — at 36% for covered active-duty service members and their dependents.

DMV - Representative Exam Practice Test

DMV - Representative Exam Practice Test

DMV Vehicle Financing and Credit Practices 3