GAP Regulatory Compliance & Standards 2

Question 1

Under CFPB oversight, which practice in GAP product marketing is considered an Unfair, Deceptive, or Abusive Act or Practice (UDAAP) violation?

Accepted Answer

Failing to disclose the maximum benefit cap in plain language

Answer

UDAAP violations include obscuring material terms such as maximum benefit caps, which consumers need to make an informed purchasing decision.

Question 2

Which federal regulation requires creditors to include the cost of optional GAP insurance in the finance charge disclosure when the purchase is mandatory for credit approval?

Accepted Answer

Truth in Lending Act (TILA) / Regulation Z

Answer

Regulation Z (implementing TILA) requires that any product whose purchase is a condition of credit must be included in the finance charge and APR calculation.

Question 3

A state insurance commissioner requires GAP providers to file rates and forms before selling the product. This requirement is an example of which regulatory framework?

Accepted Answer

Prior approval regulation

Answer

Prior approval regulation requires that rates and forms receive regulatory approval before they may be used, giving regulators direct gatekeeping authority.

Question 4

When a consumer cancels a GAP waiver product mid-term, the standard regulatory requirement regarding unearned premium is:

Accepted Answer

A pro-rata or short-rate refund must be issued to the consumer or applied to the loan

Answer

Most state regulations and FTC guidance require that unearned premiums be refunded on a pro-rata or short-rate basis when a GAP product is cancelled.

Question 5

Which entity has primary authority to regulate GAP products sold as insurance policies through franchised auto dealerships?

Accepted Answer

The state department of insurance in the state where the vehicle is sold

Answer

GAP insurance products are regulated at the state level by each state's department of insurance, which governs product forms, rates, and licensing.

(GAP) Guaranteed Asset Protection Certified Practice Test

(GAP) Guaranteed Asset Protection Certified Practice Test

GAP Regulatory Compliance & Standards 2