Topic 22 Flashcards
Consumer Credit
The annual percentage rate of charge applies to which of the following?
a) Mortgages and personal loans.
b) Credit cards and hire purchase agreements.
c) Mortgages only.
d) Mortgages, personal loans and credit cards.
c) Mortgages only.
High-cost, short-term credit must include the message: “Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.”
True or False?
True.
Under the Consumer Credit Directive, how much notice must a creditor give when terminating a credit agreement?
a) Six weeks’ notice, or two weeks’ notice if still within the cooling-off period.
b) One month’s notice, and they must notify the borrower in writing.
c) Three months’ notice, unless the debt is being sold to a third party.
d) Two months’ notice, and they must explain their reasons for termination.
d) Two months’ notice, and they must explain their reasons for termination.
Gyorgy has had an application for credit declined due to an unsatisfactory credit reference agency report. Which of the following correctly describes the lender’s position?
a) The lender must ask the credit reference agency to liaise with Gyorgy to correct any inaccuracies.
b) The lender must show Gyorgy the report and allow him to challenge inaccuracies.
c) The lender must notify Gyorgy of the reason and give him contact details for the credit reference agency.
d) The lender Is under no obligation to disclose anything to Gyorgy about the reason for the refusal.
c) The lender must notify Gyorgy of the reason and give him contact details for the credit reference agency.
Which of the following unsecured loans would not be subject to the rules contained in the FCA Consumer Credit sourcebook?
a) A loan of £10,000 to help Millie refurbish her nail bar.
b) A second charge of £30,000 on Jack’s home.
c) A loan of £30,000 for Gary to buy a family car.
d) Karen’s credit card with a £10,000 credit limit.
b) A second charge of £30,000 on Jack’s home.
Which of the following are firms forbidden from doing by the provisions of the Consumer Credit sourcebook?
a) Monitoring customers’ patterns of overdraft use.
b) Benchmarking their base prices against the prices charged by three mainstream retailers on the high street.
c) Obliging a customer to pay a rate of interest for an unarranged overdraft that exceeds the rate of interest for an arranged overdraft.
d) Setting the APR of a loan at an arbitrary value, and omitting this information from their advertisements.
c) Obliging a customer to pay a rate of interest for an unarranged overdraft that exceeds the rate of interest for an arranged overdraft.
The interest rate for an unarranged overdraft must not exceed that for an arranged overdraft.
When recommending a credit product to a customer, which of the following must the lender provide?
a) A suitability report for the product.
b) An adequate explanation of the product.
c) An explanation of alternative options.
d) A demands and needs statement.
b) An adequate explanation of the product.
Which of the following is one of the restrictions the FCA has placed on high‑cost, short‑term credit?
a) Loans cannot be rolled over.
b) Default fees cannot exceed £20.
c) Fees and charges can never exceed 75% of the amount borrowed.
d) Interest and fees cannot exceed 0.8% of the loan per day.
d) Interest and fees cannot exceed 0.8% of the loan per day.
The EU Credit Directive requires that a representative APR must be shown in any advert that shows an interest rate. The representative APR must apply to at least what percentage of successful applicants for the credit product?
a) 26%.
b) 51%.
c) 76%.
d) 81%.
b) 51%.
For the purposes of the Consumer Credit Act, a small partnership has how many partners?
a) Two or fewer.
b) Three or fewer.
c) Four or fewer.
d) Five or fewer.
b) Three or fewer.
Which of the following facts must be included on all quotations for loans regulated under consumer credit legislation?
The:
a. annual percentage rate.
b. Bank of England base rate.
c. purpose of the loan.
d. security address.
a. annual percentage rate.
