GAP Regulatory Compliance and Ethics 2

Question 1

Under UDAAP standards enforced by the CFPB, which GAP sales practice would be considered an 'unfair' act?

Accepted Answer

Charging a GAP fee that far exceeds the actual risk and benefit to the consumer

Answer

UDAAP's 'unfair' standard applies when a practice causes substantial consumer harm that consumers cannot reasonably avoid and is not outweighed by countervailing benefits.

Question 2

Which federal agency has primary supervisory authority over GAP products sold through bank-affiliated auto dealers?

Accepted Answer

Consumer Financial Protection Bureau

Answer

The CFPB has supervisory and enforcement authority over consumer financial products, including GAP coverage sold in connection with auto financing.

Question 3

A state requires a 'free-look' period for GAP waivers. What must a dealer do if a customer cancels within this period?

Accepted Answer

Provide a full refund of the GAP fee

Answer

Free-look provisions entitle the consumer to a complete refund if they cancel within the specified window, typically 30 days, without any deduction.

Question 4

Which document must be provided to a consumer at the point of GAP sale to satisfy federal Regulation Z disclosure requirements for financed products?

Accepted Answer

A Truth in Lending disclosure showing GAP as part of the finance charge if applicable

Answer

Regulation Z requires that any amounts financed, including optional products like GAP, be reflected accurately in the Truth in Lending disclosure so consumers understand their total financing cost.

Question 5

An ethics code for GAP professionals prohibits 'churning.' In the GAP context, churning means:

Accepted Answer

Canceling and rewriting GAP contracts to generate additional fees without consumer benefit

Answer

Churning involves canceling and reissuing GAP products primarily to earn additional fees or commissions, which harms consumers and violates ethical standards.

(GAP) Guaranteed Asset Protection Certified Practice Test

(GAP) Guaranteed Asset Protection Certified Practice Test

GAP Regulatory Compliance and Ethics 2