AFIP EXAM SCRIPT COMPLETE QUESTIONS AND ANSWERS
Which types of practices does the Federal Trade Commission Act address as it
relates to advertising? - ✔✔Unfair and Deceptive
✔✔If a dealership runs a monthly payment ad in which the payment and terms only
apply to one or two of the vehicles offered for sale (and that is not specifically stated in
the ad), it is running a _______ ad. - ✔✔Bait-and-Switch
✔✔If a dealership hires an agency that runs advertisements on the dealer's behalf and
those ads are later determined to be in violation of either state or federal advertising
laws, who may be held liable? - ✔✔Both the dealer and the agency
✔✔What truth-in-advertising rules apply to advertisers? - ✔✔-Advertising must be
truthful and non-deceptive
-Advertisers must have evidence to back up their claims
-Advertisements cannot be unfair
✔✔What makes an advertisement deceptive? - ✔✔If an ad contains a statement - or
omits information - that:
-Is likely to mislead consumers acting reasonably under the circumstances
-Is "material" - that is, important to a consumer's decision to buy or use the product
✔✔What makes an advertisement unfair? - ✔✔An ad or business practice is unfair if:
-It causes or is likely to cause substantial consumer injury which a consumer could not
reasonably avoid
-It is not outweighed by the benefit to consumers
✔✔What penalties can be imposed against a company that runs a false or deceptive
ad? - ✔✔-Cease and desist orders; and to pay a fine of $16,000 per day per ad if the
company violates the law in the future.
-Civil penalties, consumer redress and other monetary remedies
-Corrective advertising, disclosures and other informational remedies.
✔✔Lanham Act - ✔✔Gives companies the right to sue their competitors for making
deceptive claims in ads.
✔✔Bait and Switch - ✔✔Advertising a product when the company has no intention of
selling that item, but instead plans to sell a consumer something else, usually at a
higher price.
,✔✔What are the rules on advertising rebates to consumers? - ✔✔Ads that include
rebate promotions should prominently state the before-rebate cost, as well as the
amount of the rebate.
✔✔Gross capitalized cost - ✔✔The gross capitalized cost represents the agreed-upon
value of the vehicle being leased and the cost of any products, services, fees or
outstanding balances that will be paid, as part of the monthly lease payments, over the
term of the lease.
✔✔Capitalized cost reduction - ✔✔Includes any amounts, such as the net value of a
trade-in, factory rebate or cash, that reduce the gross capitalized cost.
✔✔Adjusted capitalized cost - ✔✔The difference between the amount entered as the
gross capitalized cost less the amount posted as the capitalized cost reduction.
✔✔Residual value - ✔✔The amount determined at the inception of the lease to be the
value of the vehicle at the end of the agreement. The residual value figure is subtracted
from the adjusted capitalized cost to determine the amount of depreciation in the value
of the vehicle that will occur over the term of the lease.
✔✔The criminal penalties for violating the CLA and Reg. M can result in a fine of up to
_______ and up to _______ year(s) in jail or both. - ✔✔$5,000/one
✔✔A(n) _______ is money paid by the lessee to the lessor to cover the cost of any
deficiency as mandated by the agreement and any funds not collected are returned to
the lessee at the termination of the lease. - ✔✔Security Deposit
✔✔(True/False) The following lease terms will vary depending on state regulation or
lessor requirements: 1) the mandated state and federal lease disclosures, 2) the
assessment and impact on the vehicle of sales, usage, local taxes and lease-related
property taxes, 3) the mandated insurance coverage - minimum and maximum
requirements, 4) posted mileage assessments and excess mileage fees, 5) excess
wear and damage standards and liability assessments, 6) restrictions as to use of the
vehicle, 7) maintenance - ✔✔True
✔✔If a lessee is responsible at the end of the lease for the difference between the
residual value of the vehicle and its actual cash value or realized value, this individual
entered into a(n) _______ lease. - ✔✔Open-End
✔✔If a lessee has the option to purchase the vehicle at the end of the lease, what
information must be recorded in the lease contract? - ✔✔-Price
-Price option fee
,✔✔The _______ is the difference between the amount entered as the gross capitalized
cost less the amount posted as the capitalized cost reduction. - ✔✔Adjusted Cap Cost
✔✔If not included in the amortized amount or gross capitalized cost, property taxes are
the responsibility of the _______ and paid _______. - ✔✔Lessee, Annually
✔✔(True/False) The amount due at lease signing does NOT need to be itemized. -
✔✔False
✔✔The _______ represents the agreed-upon value of the vehicle being leased and the
cost of any products, services, fees or outstanding balances that will be paid as part of
the monthly lease payments over the term of the lease. - ✔✔Gross Capitalized Cost
✔✔(True/False) Unlike an installment sale agreement, an F&I manager is allowed to
record a negative amount on a lease contract in the case of negative equity. - ✔✔False
✔✔(True/False) If circumstances require that a second lease agreement be executed -
the customer must be re-contracted - the date recorded on the second agreement must
be the date of the original contract. - ✔✔False
✔✔(True/False) In cases in which the lease is not regulated by the CLA or Reg. M, best
practices dictate completing the transaction as if it was governed by the CLA and Reg.
M. - ✔✔True
✔✔What are the three components of a lease payment? - ✔✔1. Depreciation
2. Amortized Amounts
3. Rent Charge
✔✔You may be able to remedy a violation of the CLA or Reg. M if, within _______ days
of discovering an error (and before being sued by the customer for the error), you notify
the customer of the error and make the necessary adjustments to the customer's
account to assure that the customer will not be required to pay an amount in excess of
the charge actually disclosed or the dollar equivalent of the APR actually disclosed,
whichever is less. - ✔✔60
✔✔(True/False) Almost all states have laws that require disclosures above and beyond
the disclosures already required by Regulation M that are just as binding as the federal
rules. - ✔✔True
✔✔What does the following describe? "The amount determined at the inception of the
lease to be the value of the vehicle at the end of the agreement." This figure is
subtracted from the adjusted capitalized cost to determine the amount of depreciation in
the value of the vehicle that will occur over the term of the lease. - ✔✔Residual Value
, ✔✔(True/False) The CLA and Reg. M disclosures must be made prior to consummation
in a form the lessee can keep. - ✔✔True
✔✔(True/False) When completing the "Amount Due at Lease Signing or Delivery"
section of a lease agreement, it's permissible to enter a single amount that represents
the total of the various amounts that will be due and payable when the contract is
executed. - ✔✔False
✔✔Which act does Regulation M implement? - ✔✔Consumer Leasing Act
✔✔A lease agreement in which the lessee's liability at the end of term is limited to
excessive wear and excess mileage charges is a(n) _______ lease. - ✔✔Closed-end
✔✔Unlike an installment sale agreement, a lease agreement lists the _______ on the
left and the _______ on the right. - ✔✔Lessor, Lessee
✔✔The _______ includes any amounts, such as the net value of a trade-in, factory
rebate or cash, that reduce the gross capitalized cost. - ✔✔Capitalized Cost Reduction
✔✔(True/False) According to the Consumer Leasing Act, a lessor may extend an
existing lease without new
disclosures on a month-to-month basis so long as the maximum term is six months or
less. - ✔✔True
✔✔(True/False) A customer wishes to pay for a used car with four cashier's checks
drawn on four different banks in the amounts of $7,500, $6,800, $3,000, and $8,300.
Since none of the checks exceeds $10,000, the F&I person need not complete IRS /
FinCEN Form 8300. - ✔✔False
✔✔A customer buying a new car is paying $5,000 cash down and owes $7,500 more on
the trade-in than was allowed. In this case, the postings on the installment sale
agreement can be: - ✔✔a. a downpayment of zero and an additional amount financed
of $2,500.
OR
b. a downpayment of $5,000 and an additional amount financed of $7,500.
✔✔The purpose of Regulation Z - ✔✔To allow people to compare the cost of credit.
✔✔Are there any defenses to a civil claim for a violation of TILA or Reg. Z? - ✔✔Yes.
1. "bona fide error" defense; and
2. "safe harbor"
Which types of practices does the Federal Trade Commission Act address as it
relates to advertising? - ✔✔Unfair and Deceptive
✔✔If a dealership runs a monthly payment ad in which the payment and terms only
apply to one or two of the vehicles offered for sale (and that is not specifically stated in
the ad), it is running a _______ ad. - ✔✔Bait-and-Switch
✔✔If a dealership hires an agency that runs advertisements on the dealer's behalf and
those ads are later determined to be in violation of either state or federal advertising
laws, who may be held liable? - ✔✔Both the dealer and the agency
✔✔What truth-in-advertising rules apply to advertisers? - ✔✔-Advertising must be
truthful and non-deceptive
-Advertisers must have evidence to back up their claims
-Advertisements cannot be unfair
✔✔What makes an advertisement deceptive? - ✔✔If an ad contains a statement - or
omits information - that:
-Is likely to mislead consumers acting reasonably under the circumstances
-Is "material" - that is, important to a consumer's decision to buy or use the product
✔✔What makes an advertisement unfair? - ✔✔An ad or business practice is unfair if:
-It causes or is likely to cause substantial consumer injury which a consumer could not
reasonably avoid
-It is not outweighed by the benefit to consumers
✔✔What penalties can be imposed against a company that runs a false or deceptive
ad? - ✔✔-Cease and desist orders; and to pay a fine of $16,000 per day per ad if the
company violates the law in the future.
-Civil penalties, consumer redress and other monetary remedies
-Corrective advertising, disclosures and other informational remedies.
✔✔Lanham Act - ✔✔Gives companies the right to sue their competitors for making
deceptive claims in ads.
✔✔Bait and Switch - ✔✔Advertising a product when the company has no intention of
selling that item, but instead plans to sell a consumer something else, usually at a
higher price.
,✔✔What are the rules on advertising rebates to consumers? - ✔✔Ads that include
rebate promotions should prominently state the before-rebate cost, as well as the
amount of the rebate.
✔✔Gross capitalized cost - ✔✔The gross capitalized cost represents the agreed-upon
value of the vehicle being leased and the cost of any products, services, fees or
outstanding balances that will be paid, as part of the monthly lease payments, over the
term of the lease.
✔✔Capitalized cost reduction - ✔✔Includes any amounts, such as the net value of a
trade-in, factory rebate or cash, that reduce the gross capitalized cost.
✔✔Adjusted capitalized cost - ✔✔The difference between the amount entered as the
gross capitalized cost less the amount posted as the capitalized cost reduction.
✔✔Residual value - ✔✔The amount determined at the inception of the lease to be the
value of the vehicle at the end of the agreement. The residual value figure is subtracted
from the adjusted capitalized cost to determine the amount of depreciation in the value
of the vehicle that will occur over the term of the lease.
✔✔The criminal penalties for violating the CLA and Reg. M can result in a fine of up to
_______ and up to _______ year(s) in jail or both. - ✔✔$5,000/one
✔✔A(n) _______ is money paid by the lessee to the lessor to cover the cost of any
deficiency as mandated by the agreement and any funds not collected are returned to
the lessee at the termination of the lease. - ✔✔Security Deposit
✔✔(True/False) The following lease terms will vary depending on state regulation or
lessor requirements: 1) the mandated state and federal lease disclosures, 2) the
assessment and impact on the vehicle of sales, usage, local taxes and lease-related
property taxes, 3) the mandated insurance coverage - minimum and maximum
requirements, 4) posted mileage assessments and excess mileage fees, 5) excess
wear and damage standards and liability assessments, 6) restrictions as to use of the
vehicle, 7) maintenance - ✔✔True
✔✔If a lessee is responsible at the end of the lease for the difference between the
residual value of the vehicle and its actual cash value or realized value, this individual
entered into a(n) _______ lease. - ✔✔Open-End
✔✔If a lessee has the option to purchase the vehicle at the end of the lease, what
information must be recorded in the lease contract? - ✔✔-Price
-Price option fee
,✔✔The _______ is the difference between the amount entered as the gross capitalized
cost less the amount posted as the capitalized cost reduction. - ✔✔Adjusted Cap Cost
✔✔If not included in the amortized amount or gross capitalized cost, property taxes are
the responsibility of the _______ and paid _______. - ✔✔Lessee, Annually
✔✔(True/False) The amount due at lease signing does NOT need to be itemized. -
✔✔False
✔✔The _______ represents the agreed-upon value of the vehicle being leased and the
cost of any products, services, fees or outstanding balances that will be paid as part of
the monthly lease payments over the term of the lease. - ✔✔Gross Capitalized Cost
✔✔(True/False) Unlike an installment sale agreement, an F&I manager is allowed to
record a negative amount on a lease contract in the case of negative equity. - ✔✔False
✔✔(True/False) If circumstances require that a second lease agreement be executed -
the customer must be re-contracted - the date recorded on the second agreement must
be the date of the original contract. - ✔✔False
✔✔(True/False) In cases in which the lease is not regulated by the CLA or Reg. M, best
practices dictate completing the transaction as if it was governed by the CLA and Reg.
M. - ✔✔True
✔✔What are the three components of a lease payment? - ✔✔1. Depreciation
2. Amortized Amounts
3. Rent Charge
✔✔You may be able to remedy a violation of the CLA or Reg. M if, within _______ days
of discovering an error (and before being sued by the customer for the error), you notify
the customer of the error and make the necessary adjustments to the customer's
account to assure that the customer will not be required to pay an amount in excess of
the charge actually disclosed or the dollar equivalent of the APR actually disclosed,
whichever is less. - ✔✔60
✔✔(True/False) Almost all states have laws that require disclosures above and beyond
the disclosures already required by Regulation M that are just as binding as the federal
rules. - ✔✔True
✔✔What does the following describe? "The amount determined at the inception of the
lease to be the value of the vehicle at the end of the agreement." This figure is
subtracted from the adjusted capitalized cost to determine the amount of depreciation in
the value of the vehicle that will occur over the term of the lease. - ✔✔Residual Value
, ✔✔(True/False) The CLA and Reg. M disclosures must be made prior to consummation
in a form the lessee can keep. - ✔✔True
✔✔(True/False) When completing the "Amount Due at Lease Signing or Delivery"
section of a lease agreement, it's permissible to enter a single amount that represents
the total of the various amounts that will be due and payable when the contract is
executed. - ✔✔False
✔✔Which act does Regulation M implement? - ✔✔Consumer Leasing Act
✔✔A lease agreement in which the lessee's liability at the end of term is limited to
excessive wear and excess mileage charges is a(n) _______ lease. - ✔✔Closed-end
✔✔Unlike an installment sale agreement, a lease agreement lists the _______ on the
left and the _______ on the right. - ✔✔Lessor, Lessee
✔✔The _______ includes any amounts, such as the net value of a trade-in, factory
rebate or cash, that reduce the gross capitalized cost. - ✔✔Capitalized Cost Reduction
✔✔(True/False) According to the Consumer Leasing Act, a lessor may extend an
existing lease without new
disclosures on a month-to-month basis so long as the maximum term is six months or
less. - ✔✔True
✔✔(True/False) A customer wishes to pay for a used car with four cashier's checks
drawn on four different banks in the amounts of $7,500, $6,800, $3,000, and $8,300.
Since none of the checks exceeds $10,000, the F&I person need not complete IRS /
FinCEN Form 8300. - ✔✔False
✔✔A customer buying a new car is paying $5,000 cash down and owes $7,500 more on
the trade-in than was allowed. In this case, the postings on the installment sale
agreement can be: - ✔✔a. a downpayment of zero and an additional amount financed
of $2,500.
OR
b. a downpayment of $5,000 and an additional amount financed of $7,500.
✔✔The purpose of Regulation Z - ✔✔To allow people to compare the cost of credit.
✔✔Are there any defenses to a civil claim for a violation of TILA or Reg. Z? - ✔✔Yes.
1. "bona fide error" defense; and
2. "safe harbor"
