UDAAP

Question 1

T or F

An institution may be in technical compliance with consumer protection rules and still have a UDAAP violation?

Answer 1

TRUE

Question 2

What does UDAAP stand for?

Answer 2

Unfair, Deceptive, & Abusive Acts or Practices

Question 3

Regulation AA applies to ___________.

Answer 3

consumer credit obligations made to a natural person for the acquisition of goods, services, or money for personal, family, or household purposes
^ does not include loans for purchase of real estate

Question 4

What credit obligation provisions are prohibited under Reg AA

Answer 4

• confession of judgment
• waiver of exemption
• assignment of wages
• security interest in household goods

Question 5

What late charge practices are prohibited by Reg AA?

Answer 5

pyramid charges: additional delinquency charge when the delinquency is attributable only to the nonpayment of prior late charges and the payment is otherwise a full payment within the due date or the grace period

Question 6

What cosigner practices are prohibited by Reg AA?

Answer 6

• misrepresentation of the nature and extent of cosigner liability to any person
• accepting cosigner signature before the cosigner is informed of the nature of liability

Question 7

Reg AA requires that disclosures be provided to cosigners ________________.

Answer 7

before they are obligated on the debt

^ for open-end credit, must give disclosures before cosigner becomes obligated for fees or transactions

Question 8

Reg AA requires that disclosures be in writing and include:

Answer 8

• substantially similar language to the model notice
• be a separate document OR slightly larger type OR set off from contract language
• applicable modifications to allow for state law

Question 9

A representation, omission, act, or practice (ROAP) may be deceptive if it is:

Answer 9

• likely to mislead
• would be deceptive from the perspective a reasonable consumer
• is material (likely to affect a consumer’s choice)

Question 10

A representation, omission, act, or practice (ROAP) may be unfair if it:

Answer 10

• causes substantial consumer injury
• injury is not outweighed by benefits to the consumer or to the competition
• injury is one that consumers could not reasonably have avoided

Question 11

One of the ways to manage UDAAP compliance risk is to verify that information provided to the consumer is _____________,

Answer 11

complete, accurate, and not likely to mislead

Question 12

One of the ways to manage UDAAP compliance risk is to avoid the use of claims such as ‘guaranteed’ or ‘pre-approved’ if ____________.

Answer 12

there is a possibility that consumers will not receive the advertised terms

Question 13

One of the ways to manage UDAAP compliance risk is to provide a clear, up-front disclosure of any contract provision that ___________.

Answer 13

permits a change in the provision of the terms of products or services offered

Question 14

One of the ways to manage UDAAP compliance risk is to avoid engaging in promotions of a product or service that highlights a particular benefit if ______________.

Answer 14

the benefit will be negated by another aspect of the transaction

Question 15

One of the ways to manage UDAAP compliance risk is to review telemarking scripts used to market products to consumers both for ___________ and _____________.

Answer 15

• accuracy
• to ensure they adequately describe the terms, benefits, and material limitations of the product or service being offered

Question 16

One of the ways to manage UDAAP compliance risk is to clearly notify consumers at the time an initial solicitation of ____________ as well as ___________.

Answer 16

• free trial periods

* subsequently if the consumer must act to cancel a service at the end of a trial period

Question 17

One of the ways to manage UDAAP compliance risk is to follow due diligence in selecting ___________.

Answer 17

a third party vendor making sure vendor is financially capable, and monitoring vendor performance

Question 18

One of the ways to manage UDAAP compliance risk is to ensure that contractual agreements with third party vendors ____________.

Answer 18

protect the bank against risk

Question 19

One of the ways to manage UDAAP compliance risk is to ensure that promotional information and solicitations do not ______________.

Answer 19

conflict with or contradict required consumer disclosures

Question 20

One of the ways to manage UDAAP compliance risk is to review consumer complaints and communications to _____________.

Answer 20

determine if the consumer was misled

Question 21

One of the ways to manage UDAAP compliance risk is to maintain procedures to ensure that payments _______________.

Answer 21

are promptly and properly posted

Question 22

One of the ways to manage UDAAP compliance risk is to ensure that collections ___________.

Answer 22

are monitored (including third party collections)

Question 23

One of the ways to manage UDAAP compliance risk is to ensure advertisements clearly disclose a ___________ and ______________ the customers may use to contact the bank.

Answer 23

• telephone number

* address

Question 24

One of the ways to manage UDAAP compliance risk is to review compensation agreements for bank employees and third parties to ensure that ___________.

Answer 24

there are no unintended incentives to engage in unfair practices

Question 25

Banks do not have to provide the cosigner notice to persons who simply _____ property as collateral on the debt of another person.

Answer 25

pledge

Question 26

T or F
Amounts owed after a judgment is obtained are not subject to the late charge application restrictions of Regulation AA. However, the bank may be subject to state law restrictions regarding the application of funds.

Answer 26

TRUE

Question 27

What must a bank do when inapplicable language is included in an application that applies to both consumer and commercial transactions?

Answer 27

The bank should cross out, blacken in, or remove the language in consumer contracts. According to the Federal Trade Commission (FTC) guidelines on the Credit Practices Rule, the bank does not have to reprint forms when the qualifying language does not meet the public policy requirements of the regulation.

Question 28

What is the term used to describe the balance remaining on a card once a new APR is applied to subsequent transactions?

Answer 28

protected balance

Question 29

How may a creditor legally obtain an assignment of the consumer’s wages in a consumer credit obligation?

Answer 29

By the consumer’s execution of an assignment that is revocable at the consumer’s will.