Credit & Account Management Flashcards

Under the Fair Credit Reporting Act (FCRA), which is a permissible purpose for obtaining a consumer report?

Answer: Reviewing or collecting on an existing credit account of the consumer

FCRA permits pulling a report in connection with review or collection of a consumer's existing account.

Under the FCRA, most negative information such as delinquent accounts can remain on a consumer credit report for how long?

Answer: 7 years

Most adverse items may be reported for seven years, while Chapter 7 bankruptcies may remain for ten.

Under the FFIEC Uniform Retail Credit Classification policy, open-end retail credit such as credit cards is generally charged off at how many days past due?

Answer: 180 days

Open-end retail credit is charged off at 180 days past due, while closed-end loans are charged off at 120 days.

Using the allowance method to estimate bad debt expense in the same period as the related sales follows which accounting principle?

Answer: Matching principle

The matching principle records expenses in the same period as the revenues they help generate.

What is the main effect of obtaining a personal guarantee from a business owner on a commercial account?

Answer: It makes the owner personally liable if the business fails to pay

A personal guarantee lets the creditor pursue the guarantor's personal assets if the business defaults.

What is the purpose of filing a UCC-1 financing statement?

Answer: To perfect a security interest in the debtor's collateral

Filing a UCC-1 gives public notice and establishes the creditor's priority in the collateral.

What does a Collection Effectiveness Index (CEI) close to 100% indicate?

Answer: Nearly all receivables available for collection during the period were collected

CEI compares amounts collected with amounts available to collect, so values near 100% show highly effective collections.