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AFIP Basic Certification Exam Questions and Answers (Updated 2025/2026), Exams of Business and Labour Law

Duke UniversityBusiness and Labour Law

A set of questions and answers related to the afip basic certification exam, updated for the 2025/2026 edition. It covers topics such as udap and udaap violations, contract law, tila/reg z regulations, and credit sales. The material is designed to test and reinforce understanding of key concepts in finance and compliance, making it a valuable resource for individuals preparing for the certification exam. Each question is followed by a detailed explanation, enhancing the learning experience and ensuring clarity on complex topics. This resource is particularly useful for those in the automotive finance industry seeking to enhance their knowledge and skills in regulatory compliance and consumer protection.

Typology: Exams

2024/2025

Available from 09/23/2025

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AFIP Basic Certification Exam –
Updated 2025/2026 Edition
1.The ________ issues UDAP violations to dealers, the ________ issues UDAAP
violations to dealers.
A. CFPB, FTC
B. FTC, CFPB
C. State Attorney General, CFPB
Answer: B. FTC, CFPB
Explanation: The Federal Trade Commission (FTC) enforces UDAP (Unfair and Deceptive
Acts and Practices) while the Consumer Financial Protection Bureau (CFPB) enforces UDAAP
(Unfair, Deceptive, or Abusive Acts or Practices).
2. (True/False) If circumstances require that a second lease agreement be executed—the
customer must be recontracted—the date recorded on the second agreement must be the
date of the original contract.
Answer: False
Explanation: The second lease must reflect the actual date of execution. Using the original
contract date would be a violation under Reg. M guidelines.
3. Which of the following events, if any, can terminate an offer?
A. Death or insanity of an offeree or offeror
B. Revocation of offer before acceptance
C. Expiration of specified time
Answer: D. All of the above
Explanation: An offer can terminate through death/insanity, revocation, or lapse of time.
4. What is "consideration" as it applies to a contract?
A. A benefit only to one party
B. A mutual exchange of promises only
C. The requirement that each party receives something of value
Answer: C. The requirement that each party receives something of value
Explanation: Consideration is a legal requirement in contracts meaning both parties must
exchange something of value (money, service, or promise).
5. If a customer is re-contracted five days after the original agreement was executed, how
should the second agreement be treated?
A. An addendum to the original agreement
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Download AFIP Basic Certification Exam Questions and Answers (Updated 2025/2026) and more Exams Business and Labour Law in PDF only on Docsity!

AFIP Basic Certification Exam –

Updated 2025/2026 Edition

1.The ________ issues UDAP violations to dealers, the ________ issues UDAAP violations to dealers. A. CFPB, FTC B. FTC, CFPB C. State Attorney General, CFPB Answer: B. FTC, CFPB Explanation: The Federal Trade Commission (FTC) enforces UDAP (Unfair and Deceptive Acts and Practices) while the Consumer Financial Protection Bureau (CFPB) enforces UDAAP (Unfair, Deceptive, or Abusive Acts or Practices).

  1. (True/False) If circumstances require that a second lease agreement be executed—the customer must be recontracted—the date recorded on the second agreement must be the date of the original contract. Answer: False Explanation: The second lease must reflect the actual date of execution. Using the original contract date would be a violation under Reg. M guidelines.
  2. Which of the following events, if any, can terminate an offer? A. Death or insanity of an offeree or offeror B. Revocation of offer before acceptance C. Expiration of specified time Answer: D. All of the above Explanation: An offer can terminate through death/insanity, revocation, or lapse of time.
  3. What is "consideration" as it applies to a contract? A. A benefit only to one party B. A mutual exchange of promises only C. The requirement that each party receives something of value Answer: C. The requirement that each party receives something of value Explanation: Consideration is a legal requirement in contracts meaning both parties must exchange something of value (money, service, or promise).
  4. If a customer is re-contracted five days after the original agreement was executed, how should the second agreement be treated? A. An addendum to the original agreement

B. As an entirely new agreement with the actual date C. As the same contract with original date Answer: B. As an entirely new agreement with the actual date Explanation: Best practices require treating recontracting as a new agreement, dated correctly to avoid TILA/Reg. Z violations.

  1. (True/False) TILA/Reg Z treats "loans" and "credit sales" the same way since they are both essentially a promise to pay. Answer: True Explanation: Both loans and credit sales are treated alike because they represent extensions of credit that require repayment.
  2. Although not specifically required by the TILA or Reg. Z, an installment sale contract may contain an acceleration clause. This allows the funding source to require immediate payment of the balance if certain requirements are not met. (True/False) Answer: True Explanation: While not mandatory, acceleration clauses are common and enforceable, provided they comply with state law and contract terms.
  3. The CFPB issues UDAAP violations. UDAAP stands for: A. Uniform Deceptive Acts and Advertising Practices B. Unlawful Deceptive Actions and Agreements in Purchasing C. Unfair, Deceptive, or Abusive Acts or Practices Answer: C. Unfair, Deceptive, or Abusive Acts or Practices Explanation: UDAAP is a core consumer protection standard under CFPB authority.
  4. A contract can be defined as an agreement that includes: A. Just an offer B. A promise not legally binding C. A promise or set of promises enforceable by law Answer: C. A promise or set of promises enforceable by law Explanation: A valid contract must include an offer, acceptance, and consideration, enforceable by legal standards.
  5. Which of the following is considered a "credit sale" transaction under TILA/Reg Z? A. Karl pays cash for a vehicle B. Karl arranges funding through the F&I manager for a vehicle C. Karl gets a personal loan from a friend

Answer: D. All of the above Explanation: A valid acceptance requires unconditional agreement, timely communication, and within the time allowed.

  1. The __________ issues UDAP violations to dealers, the __________ issues UDAAP violations to dealers. A. CFPB, FTC B. FTC, CFPB C. State regulators, FTC Answer: B. FTC, CFPB Explanation: FTC enforces UDAP, while CFPB enforces UDAAP.
  2. (True/False) The dealer is the creditor in a typical credit transaction. Answer: True Explanation: In retail installment sales, the dealer extends credit directly, making them the creditor until assignment.
  3. As noted in the Truth in Lending Act and Reg. Z, if the customer owes more on the trade- in than the used car manager allowed, what should the F&I manager do? A. Increase the allowance on the trade-in B. Hide the negative equity C. Ignore the deficiency D. None of the above Answer: D. None of the above Explanation: Negative equity must be transparently disclosed and rolled into the new financing if applicable—manipulating trade-in values violates Reg. Z.
  4. Which of the following transactions are NOT regulated by TILA/Reg Z? A. Personal loans B. Auto installment contracts C. Mortgage loans D. Both A and C Answer: D. Both A and C Explanation: Reg. Z excludes some types of loans such as business/commercial loans, not consumer auto installment contracts.
  5. (True/False) With the exception of some Precomputed Interest contracts used by secondary finance sources, all other installment sales contracts are simple interest or interest-bearing contracts.

Answer: True Explanation: Most installment sales use simple interest where finance charges accrue daily; precomputed contracts are less common.

  1. Which of the following regulations implements the Truth in Lending Act? A. Regulation B B. Regulation M C. Regulation X D. Regulation Z Answer: D. Regulation Z Explanation: TILA is implemented through Regulation Z, which governs disclosure requirements.
  2. (True/False) The Truth in Lending Act (TILA) is implemented by Regulation Z. Answer: True Explanation: TILA is enforced through Regulation Z, ensuring lenders provide standardized credit disclosures.
  3. The APR is a mandated disclosure. It must be used in oral discussion with a customer, in advertisements, and on the retail installment sale agreement. A customer asks, what does APR mean? A. The monthly payment B. The cost of credit as a yearly rate C. The dealer’s profit margin Answer: B. The cost of credit as a yearly rate Explanation: The Annual Percentage Rate (APR) reflects the yearly cost of borrowing, making credit terms comparable.
  4. (True/False) State law can require additional disclosures beyond those mandated by the TILA, Reg. Z. Answer: True Explanation: Federal law provides a baseline; states may impose stricter consumer protection requirements.
  5. (True/False) All of the following items are Truth in Lending Act or Reg. Z disclosure box items: A. The amount financed B. The total of the payments C. The dollar or percentage charged due to a late payment D. The cost of an oil change E. The payment schedule

B. Civil penalty only C. $10,000 fine and 2 years imprisonment D. $5,000 fine, 1 year imprisonment, or both Answer: D. $5,000 fine, 1 year imprisonment, or both Explanation: Criminal penalties under TILA/CLA include fines, imprisonment, or both for willful violations.

  1. (True/False) According to Regulation Z, down payment and total sale price must be disclosed. Answer: True Explanation: Both are material disclosures under Reg. Z and must be shown on the contract.
  2. (True/False) Any communication to a single individual—verbally or in writing—does not meet standards for an advertisement. Answer: True Explanation: Reg. Z defines “advertising” as communication to the public, not private individual conversations.
  3. (True/False) General phrases such as “Zero APR, no down payment, or financing available” meet the standards for an advertisement. Answer: False Explanation: Ads must include clear disclosures when using triggering terms; general phrases alone are insufficient.
  4. (True/False) A violation of the advertising rules may result in a cease and desist order. Answer: True Explanation: The FTC and CFPB can issue cease and desist orders for non-compliant advertisements.
  5. (True/False) A potential fine of up to $43,792 per day/per violation may be imposed if a cease and desist order is ignored, plus potential UDAP action at the state level. Answer: True Explanation: Ignoring an order triggers heavy daily penalties and possible state-level UDAP enforcement.
  6. (True/False) The dealer is liable for the actions of the advertising agency. Answer: True Explanation: Dealers are responsible for compliance, even if they outsource advertising.
  1. What is the correct way to record negative equity on an installment sale agreement when it is greater than the amount paid down? A. Increase the vehicle price B. Deduct down payment from negative equity, record zero as down payment, and roll balance into financing C. Hide the negative equity Answer: B. Deduct down payment from negative equity, record zero as down payment, and roll balance into financing Explanation: This ensures accurate disclosure of negative equity without misrepresenting contract figures.
  2. Which of the dollar amounts listed in the TILA box disclosures are included in the Total Sale Price? A. The amount financed B. The finance charge C. The total of payments D. All of the above Answer: D. All of the above Explanation: The total sale price includes all financing-related costs disclosed in the TILA box.
  3. (True/False) A principal purpose of TILA is to promote the informed use of credit by requiring disclosures about its terms and cost. Answer: True Explanation: TILA ensures consumers can compare credit options and understand borrowing costs.
  4. The TILA/Reg. Z states that the customer must take possession of the Retail Installment Sale Agreement prior to it being disclosed. Which of the following “best practice” steps should be followed? A. Provide a completed but unsigned contract for review B. Allow customer sufficient review time C. Ensure contract is readable and clear D. All of the above Answer: D. All of the above Explanation: Best practice ensures customer transparency and compliance with disclosure rules.
  5. (True/False) A situation exists that requires the customer to be re-contracted and sign a new Retail Installment Sale Agreement five days after consummating the deal. If the recontract period is less than seven business days, the original date can be used on the second agreement.

C. $10,000, 5

D. $20,000, 3

Answer: A. $5,000, 1 Explanation: Criminal penalties include fines of up to $5,000 and/or one year imprisonment.

  1. (True/False) Hold check money constitutes a deferred down payment and is included in the amount paid down. It is not recorded on the contract. Answer: True Explanation: Hold checks are considered deferred down payments and must be accounted for correctly.
  2. The term “Contract Provisions” is a TILA box statement. If asked to explain the Acceleration Clause, your response should be: A. A penalty fee for refinancing early B. A contractual right to accelerate the balance if payments are missed or insurance lapses C. A refund for early payoff Answer: B. A contractual right to accelerate the balance if payments are missed or insurance lapses Explanation: The clause allows the creditor to demand full payment under specific contract breaches.
  3. Which of the following statements are not true in regards to how deferred down payments are treated under TILA/Reg Z? A. They must be paid in full before the second payment B. Finance charges can’t be assessed on deferred down payments C. The amount of deferred down payment is excluded from the amount financed D. State laws may dictate recording methods E. None of the above Answer: E. None of the above Explanation: All statements listed are true—deferred down payments are carefully regulated under TILA.
  4. Which of the following terms do NOT qualify as a triggering term? A. Amount or percentage of any down payment B. Number of payments or contract term C. Amount of any payment D. The dollar amount of any finance charge E. The name of the financing source Answer: E. The name of the financing source Explanation: Financing source details are not considered triggering terms under Reg. Z.
  1. If an installment sale advertisement includes any one of the triggering terms, which of the following must also be included in the ad? A. The amount or percentage of the down payment B. The terms of repayment C. The APR D. The name of the funding source to whom the contract will be assigned Answer: A, B, and C (All of the above except D) Explanation: Reg. Z requires disclosure of down payment, repayment terms, and APR whenever a triggering term is used. The funding source does not need to be disclosed.
  2. (True/False) According to Reg. Z, it is necessary to disclose APR and the Finance Charge. Answer: True Explanation: APR and the finance charge are mandatory disclosures under Reg. Z.
  3. What are the potential penalties for a dealer if they continue to run an ad after receiving a cease and desist order? A. Warning only B. $10,000 per violation C. $43,792 per day, per violation D. Suspension of license Answer: C. $43,792 per day, per violation Explanation: Federal enforcement imposes daily penalties for ignoring cease and desist orders.
  4. The total sale price is ______ the largest number on the installment contract. A. Sometimes B. Never C. Depends on state law D. Always Answer: D. Always Explanation: The total sale price is always the largest number, as it includes vehicle cost, finance charges, and all payments.
  5. What are the liabilities for a dealer if the court finds against them for a civil violation of TILA/Reg. Z or CLA/Reg. M? A. Actual damages B. Attorney fees and court costs C. Statutory damages D. All of the above
  1. What is the criminal penalty for an F&I practitioner that violates the CLA/Reg. M? A. $1,000 fine only B. $10,000 fine, no jail C. $5,000 fine and up to 1 year in jail D. License suspension Answer: C. $5,000 fine and up to 1 year in jail Explanation: CLA/Reg. M violations carry criminal fines and imprisonment.
  2. What are the potential liabilities for a dealership that violates CLA/Reg. M triggering term advertising requirements? A. Civil penalties B. Criminal penalties C. Cease and desist orders D. All of the above Answer: D. All of the above Explanation: Violations can lead to civil, criminal, and administrative penalties.
  3. (True/False) CLA is implemented by Regulation M. Answer: True Explanation: The Consumer Leasing Act (CLA) is enforced through Regulation M.
  4. The CLA and Reg. M permit lease agreements to be printed in any language, but they must be available in ________. A. English B. Spanish C. French Answer: A. English Explanation: Contracts may be translated, but an English version must always be available.
  5. (True/False) According to Reg. M, the APR must be disclosed. Answer: False Explanation: APR disclosure applies to credit sales, not leases. Lease agreements disclose money factors instead.
  6. The main purpose of CLA is to regulate ________. A. Property leases B. Consumer vehicle leases C. Real estate loans

Answer: B. Consumer vehicle leases Explanation: CLA/Reg. M governs consumer leases where vehicles are primarily for personal, family, or household use.

  1. Which of the following are disclosures required on a lease contract by the CLA/Reg. M? A. Early termination conditions B. Payment schedule C. Excess mileage charges D. All of the above Answer: D. All of the above Explanation: CLA requires clear disclosure of key lease terms, including costs and conditions.
  2. (True/False) The CLA/Reg. M disclosures must be made prior to consummation and in a form that the lessee can keep. Answer: True Explanation: As with Reg. Z, disclosures must be provided before signing and in a form the consumer retains.
  3. Which of the following are triggering terms for a lease ad? A. Amount of any payment B. Number of payments C. Capitalized cost reduction D. All of the above Answer: D. All of the above Explanation: Including these in lease ads requires full disclosure under Reg. M.
  4. (True/False) CLA/Reg. M governs consumer lease transactions, which apply when vehicles are used primarily (51% or more) for household, personal, or family purposes. Answer: True Explanation: Consumer leases must be predominantly for personal or household use.
  5. The total gross capitalized cost amount on a lease agreement is comprised of the agreed- upon value of the vehicle and ______. A. All other capitalized items (fees, insurance, etc.) B. Warranty charges only C. Finance charges only Answer: A. All other capitalized items (fees, insurance, etc.) Explanation: Capitalized cost includes vehicle price and additional financed items.
  6. Which of the following disclosures are NOT required by CLA/Reg. M on a lease agreement?

Answer: True Explanation: If the error was unintentional, discovered promptly, and corrected, the “bona fide error defense” applies under TILA.

  1. According to TILA, Reg. Z and CLA, Reg. M, with the exception of advertising rules, dealers must maintain evidence of disclosures (copies of installment sale contracts or lease agreements) for _______. A. 12 months B. 36 months C. The later of 2 years after the disclosures are required or 25 months after consummation D. 60 months Answer: C. The later of 2 years after the disclosures are required or 25 months after consummation Explanation: Record retention ensures compliance monitoring by regulators.
  2. (True/False) When a purchase or lease exceeds the total contractual obligation of $58,300, it is considered a best practice to abide by TILA/Reg. Z or CLA/Reg. M regulations. Answer: True Explanation: Even when outside the dollar coverage cap, best practice is to apply TILA/CLA standards for transparency.
  3. (True/False) TILA/Reg. Z and CLA/Reg. M grant consumers the right to rescind a vehicle installment sale contract. Answer: False Explanation: Vehicle installment contracts are exempt from rescission rights (unlike some home-secured loans).
  4. If an error has been made, to avoid civil liability, an F&I professional can, within ______ days of discovering the error (and before being sued), notify the customer and make necessary corrections. A. 10 days B. 30 days C. 45 days D. 60 days Answer: D. 60 days Explanation: Reg. Z allows 60 days to correct errors without liability if the consumer is notified.
  1. TILA Reg. Z and CLA Reg. M disclosures must be made prior to consummation and in a form the buyer or lessee can keep. (True/False) Answer: True Explanation: Both regulations require disclosures before signing and in a retainable form.
  2. A car dealership is required to provide TILA and CLA disclosures to the consumer before they have executed a Retail Installment Sales Contract or Consumer Lease Agreement. (True/False) Answer: True Explanation: Disclosure must occur before execution so consumers understand terms.
  3. The maximum dollar amount covered by TILA/Reg. Z and CLA/Reg. M for 2025 for personal, household, or family use (51% or more of the time) is ____________. A. $58, B. $61, C. $63, D. $65, Answer: C. $63, Explanation: The dollar threshold adjusts annually for inflation. For 2025, the updated limit is $63,000.
  4. (True/False) When a purchase or lease exceeds the total contractual obligation of $58,300, it is considered a best practice to abide by TILA/Reg. Z or CLA/Reg. M regulations. Answer: True Explanation: Even if exempt due to the dollar limit, applying the rules ensures consumer protection and lowers liability risk.
  5. What is the difference between a co-signer and a co-buyer? A. A co-signer guarantees the loan but does not take ownership B. A co-buyer shares ownership and liability C. A co-signer’s liability only applies if borrower defaults D. Both A and B

B. $46,

C. $50,

D. $60,

Answer: B. $46, Explanation: As of 2025, the FTC maximum penalty for Used Car Rule violations is $46, per violation, adjusted annually.

  1. Which of the following is NOT found on the Used Car Buyer’s Guide? A. Verbal promises are hard to enforce—get everything in writing B. Request to have the car inspected by a mechanic C. Typical problems for specific systems D. Whether or not the vehicle is sold with a warranty Answer: C. Typical problems for specific systems Explanation: The Buyer’s Guide does not list specific problems; it only advises inspection and warranty details.
  2. (True/False) You may remove the Buyer’s Guide for a test drive, but you must replace it immediately after. Answer: True Explanation: The Buyer’s Guide must remain posted at all times except during test drives.
  3. According to the Used Car Rule, what is a “used vehicle”? A. Any car sold after first retail delivery B. Vehicles previously titled C. Vehicles sold “as is” D. All of the above Answer: D. All of the above Explanation: A vehicle is considered “used” if previously titled or delivered to a retail customer.
  4. (True/False) The Used Car Rule applies to all vehicles regardless of weight. Answer: False Explanation: It only applies to vehicles under a certain weight (under 8,500 pounds gross weight).
  5. (True/False) You must give the buyer the original or a copy of the Buyer’s Guide at the time of sale, reflecting all final changes. The buyer must also sign it. Answer: True Explanation: The signed Buyer’s Guide becomes part of the contract and must reflect final terms.
  1. (True/False) A dealership must provide a Buyer’s Guide in Spanish if negotiations are conducted in Spanish. Answer: True Explanation: FTC requires that the Buyer’s Guide match the language of the negotiation.
  2. (True/False) If you conduct a used car transaction in Spanish, you are only required to provide the Spanish Buyer’s Guide at the end of the sale, not post it on the vehicle. Answer: False Explanation: Both posting and final delivery must be in the language used during negotiations.
  3. The Used Car Rule prohibits: A. Misrepresenting warranty coverage B. Removing or altering the Buyer’s Guide before sale C. Both A and B Answer: C. Both A and B Explanation: Dealers cannot alter, misrepresent, or fail to provide the Buyer’s Guide.
  4. A dealer voluntarily chooses NOT to sell a car “as is.” The dealer does NOT provide an express written warranty. The window sticker must indicate the vehicle is sold with _______. A. Implied warranties only B. No warranty at all C. Third-party warranty D. State warranty Answer: A. Implied warranties only Explanation: If a dealer does not sell “as is” and provides no written warranty, state implied warranties apply.