Question 1

_____ is an agreement by an employee that a creditor may take future wages as security for a loan or to pay an existing debt.

Accepted Answer

Wage assignment is an agreement between an employee and a creditor, which allows the creditor to garnish the employee's wages to pay off an existing debt or as security for a loan. Garnishment, also known as wage garnishment, is a legal process that enables a creditor to take a portion of an employee's wages or salary, with a court order, to pay off an outstanding debt. Confession of judgment, sequestration, and interception are different legal concepts.

Question 2

A written agreement in which the defendant in a lawsuit admits liability and accepts the amount of agreed-upon damages that must be paid to the plaintiff is known as a(n) _____ agreement.

Accepted Answer

A confession of judgment is a legal agreement in which a defendant admits to owing a debt and agrees to pay the amount owed without having to go through a formal court proceeding. This is commonly used in commercial and business contracts. The other options listed do not fit the description of this kind of agreement.

Question 3

Which of the following acts ensured that every individual who has need for consumer credit is given full disclosure of the finance charge and the annual percentage rate of interest?

Accepted Answer

The Truth in Lending Act requires lenders to provide full disclosure of the finance charge and the annual percentage rate of interest for consumer credit.

Question 4

In the 1960s married couples were sometimes told that a bank would grant them credit if the wife would get a hysterectomy.

Accepted Answer

This practice was known as the "sterilization loan" and was a real phenomenon in the 1960s. In some cases, banks required women to undergo sterilization as a condition for obtaining certain loans, including mortgages. This discriminatory practice was eventually outlawed, but it serves as a reminder of the systemic sexism and gender-based discrimination that existed (and in some cases, still exists) in our financial systems.

Question 5

Which of the following acts restricts card issuers from providing tangible gifts to students on college campuses in exchange for filling out a credit card application?

Accepted Answer

The Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) restricts card issuers from providing tangible gifts to students on college campuses in exchange for filling out a credit card application. This was implemented to prevent students from being lured into signing up for credit cards with high interest rates and fees.

Question 6

_____ is the practice by a financial institution of refusing to grant home loans or home-improvement loans to people living in low-income neighborhoods.

Accepted Answer

Redlining is the practice of denying home loans or home-improvement loans to people living in low-income neighborhoods. This practice is discriminatory as it targets people based on the location of their homes rather than their creditworthiness. Redlining has contributed to the lack of investment and disinvestment in many low-income neighborhoods, perpetuating poverty and inequality.

Question 7

Critics of the Consumer Financial Protection Bureau assert that it unduly burdens creditors, banks, and financial institutions at the consumer level.

Accepted Answer

Critics of the Consumer Financial Protection Bureau argue that its regulations and enforcement actions place undue burdens on businesses operating in the financial sector, particularly banks and creditors. Some argue that the agency's lack of accountability and limited oversight create an environment in which businesses must comply with costly and confusing rules, ultimately harming consumers by limiting access to credit and other financial services. However, supporters of the CFPB argue that the agency is necessary to protect consumers from unfair and abusive practices by financial companies.

Question 8

In 1970, Congress enacted the _____ to give consumers access to their credit files in order to correct errors.

Accepted Answer

The Fair Credit Reporting Act was enacted in 1970 to give consumers access to their credit files in order to correct errors. It also sets rules for how credit reporting agencies can collect, maintain, and distribute consumer credit information.

Question 9

Which of the following is true of the Fair Credit Reporting Act?

Accepted Answer

Under the Fair Credit Reporting Act, if an applicant is denied credit, they have the right to be informed of the name and address of the credit bureau that provided the report used in the decision.

Question 10

The _____ amended the Truth in Lending Act by requiring credit card issuers to disclose in a uniform manner the annual percentage rate, annual fees, grace period, and other information on credit card applications.

Accepted Answer

The Fair Credit and Charge Card Disclosure Act amended the Truth in Lending Act to require uniform disclosure of credit card information on applications, including APR, fees, and grace period.

Question 11

Which of the following provisions regarding the Fair Credit Billing Act is accurate?

Accepted Answer

The Fair Credit Billing Act applies to open-end credit accounts, such as credit cards, and not to installment sales.

Question 12

The _____ is the total of all money paid for credit.

Accepted Answer

The finance charge is the total amount of money paid for credit, which includes not only the interest charged on the loan but also any additional fees or charges associated with the credit agreement. The other options listed in the question are not relevant to this definition.

Question 13

"Redlining" is the process of deleting incorrect credit charges on a consumer's account.

Accepted Answer

"Redlining" is a discriminatory practice of denying loans or insurance in certain neighborhoods based on their racial or socioeconomic makeup, and has nothing to do with deleting incorrect credit charges on a consumer's account. It is illegal under the Fair Housing Act.

Question 14

Under the _____, a creditor may not ask a credit applicant to state sex, race, national origin, or religion.

Accepted Answer

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in the credit application process on the basis of sex, race, color, religion, national origin, age, marital status, or receipt of public assistance. This means that a creditor may not ask a credit applicant about their sex, race, national origin, or religion during the application process. The other answer options do not directly relate to this aspect of the credit application process.

Question 15

Which of the following is true of the Truth in Lending Act?

Accepted Answer

The Truth in Lending Act protects natural-person debtors, which refers to individual borrowers rather than business entities.

Answer: D
 The Truth in Lending Act regulates open-end credits, which are typically revolving lines of credit like credit cards or home equity lines of credit.

Option A is incorrect because the Consumer Leasing Act is a separate law that specifically regulates lease agreements; it is not part of the Truth in Lending Act. Option C is incorrect because the Truth in Lending Act does not establish maximum interest rates, but rather requires lenders to disclose the APR (annual percentage rate) and other loan terms so that borrowers can compare offers and make informed decisions. Option E is also incorrect because the Truth in Lending Act applies to credit-card transactions and requires lenders to disclose key terms like the APR, grace period, and fees.

Question 16

An investigative report, as part of a dossier collected to determine if a person should get credit, cannot include such items as that the applicant drinks heavily, or is engaged in dangerous sports (like paragliding).

Accepted Answer

The answer of An investigative report, as part of a...

Question 17

_____ is a legal process by which a creditor can obtain a court order directing the debtor's employer or any party who owes money to the debtor to pay directly to the creditor a certain portion of the employee's wages until the debt is paid.

Accepted Answer

Garnishment is the legal process where a creditor can obtain a court order to have a portion of a debtor's wages paid directly to the creditor until the debt is satisfied.

Question 18

Under the Equal Credit Opportunity Act a creditor may not ask if the credit applicant is married.

Accepted Answer

The Equal Credit Opportunity Act prohibits creditors from asking about the marital status of a credit applicant.

Question 19

Under the Equal Credit Opportunity Act:

Accepted Answer

Under the Equal Credit Opportunity Act, if credit is refused, the creditor must disclose the reasons for rejection upon demand. This promotes fairness and transparency in the credit process.

Answer: A 
 Alimony received and child support payments cannot be considered as sources of income under the Equal Credit Opportunity Act. This is to prevent discrimination against those who may rely on such sources of income.

Answer: D 
 The creditor is not required to ask all credit applicants for a statement of marital status under the Equal Credit Opportunity Act. Doing so may result in discrimination on the basis of marital status.

Answer: B and E 
 Both options are incorrect. Under the Equal Credit Opportunity Act, questions about plans for children are not allowed as they may result in discrimination based on familial status. Additionally, a spouse is not required to cosign on a loan irrespective of their creditworthiness. Cosigning is a decision based on the lender's evaluation of the individual's creditworthiness.

Question 20

The Home Mortgage Disclosure Act, 1975, and the Community Reinvestment Act, 1977, prohibit:

Accepted Answer

The Home Mortgage Disclosure Act and the Community Reinvestment Act aim to prevent discriminatory practices in lending, such as redlining, where lenders refuse to provide loans or offer unfavorable terms to certain neighborhoods based on racial or economic factors.

Quiz 27: Consumer Credit Transactions