1. Finance companies differ from banks in that they do not accept deposits.
2. Finance companies have been among the slowest growing FI groups in recent years.
3. Sales finance institutions provide financing to customers of specific retailers.
4. Personal credit institutions specialize in making equipment leases to consumers.
5. Factoring is the process where accounts are purchased by a nonfinancial company at a discount from their
face value in exchange for the responsibility of collection.
6. A major role of the captive finance company is to provide financing for the purchase of products
manufactured or sold by the parent company.
7. Over the last 30 years finance companies have replaced real estate loans and other assets with increasing
amounts of consumer and business loans.
8. Sales finance institutions compete directly with depository institutions for consumer loans.
9. Finance companies generally charge lower interest rates on consumer loans than do commercial banks.
10. The parent institution provides all of the debt and equity that a captive finance company will use to generate
personal loans.
11. Finance companies generally attract less risky customers than do commercial banks.
12. Securitized mortgage assets are used as collateral backing secondary market securities.
13. As of the late 2000s, real estate loans dominated the assets of finance companies.
14. The growth in home equity lines of credit over the last two decades has occurred in part because of the tax
deductibility of the interest payments.
15. Bad debt expense and administrative costs are lower on home equity loans than other typical loans of
finance companies.
16. When a finance company pools mortgages with similar characteristics and securitizes the pool, the new
mortgage-backed security is removed from the balance sheet of the finance company.
17. Finance companies are subject to regulations that restrict the types of products and services they can offer to
small business customers.
18. Because finance companies do not accept deposits, they do not have bank regulators providing oversight of
their activities.
19. Finance companies generally have higher overhead than do commercial banks.
20. Wholesale motor vehicle loans and leases constitute the largest subcategory of business loans.
21. Wholesale loans are loan agreements between corporations and their customers at reduced interest rates.
22. The largest category of business loans of finance companies is securitized business assets.
23. Finance companies prefer to lease equipment rather than to sell and finance it because they receive part of
the lease payment in the form of a down payment from the purchaser.
24. Finance companies have relied primarily on short-term commercial paper and other debt sources to finance
asset growth.
25. Finance companies currently rely more heavily on bank loans as a source of financing than in 1977.
26. As of March 2010, the payday loan industry was regulated at the federal level.
27. As the economic expansion continued through the 1990s, the demand for finance company loans increased.
28. Finance companies have had no significant downturns in economic performance over the last two decades.
29. As an industry, finance companies have escaped the merger and consolidation activity that has affected
nearly every other sector of the financial services industry.
30. Finance companies have traditionally been subject to state-imposed usury ceilings on the maximum loan
rate charged to any individual customers.
31. The typical customer of a payday lender has income of between $25,000 and $50,000 per year.
32. The FDIC allows its member banks to participate in payday lending.
33. What is the primary function of finance companies?
34. Finance companies have enjoyed very high rates of growth because they
35. Which of the following is NOT true?
36. Which of the following is NOT a type of finance company?
37. A company that specializes in making installment loans to consumers would best be categorized as a
38. This type of finance company competes directly with depository institutions for consumer loans because
they can frequently process loans faster and more conveniently.
39. A company that specializes in making loans to the customers of a particular retailer or manufacturer would
best be categorized as a
40. Factoring involves
41. Which of the following is NOT true?
42. Finance companies charge different rates than do commercial banks which
43. Which of the following is not an advantage of a finance company over a commercial bank in providing
services to small business customers?
44. Finance companies often prefer to lease equipment because
45. Which of the following is the type of loan that Ford Motor Credit Corporation provides to Ford dealers to
finance the cars that the dealer has for sale?
46. In financing their asset growth, finance companies
47. General Motors Acceptance Corporation (GMAC)
48. During the period from 1977 to 2009,
49. Prior to the financial crisis that began in 2007, finance companies
50. Which of the following is a major source of debt for a captive finance company?
51. As of 2009, which of the following is true concerning payday lending?
52. A finance company may be classified as a subprime lender if it
53. Finance companies that prey on desperate higher-risk customers charging unfairly exorbitant interest rates
are referred to as
54. Home equity loans have
55. Which of the following is NOT a type of consumer loan?
56. Which of the following might lead a consumer to seek a loan from a subprime lender?
57. Compared to commercial banks, why do finance companies often have substantial industry and product
expertise?
58. A company that provides financing to corporations, especially through equipment leasing and factoring
would best be categorized as a
59. Which of the following observations concerning payday lenders is NOT true?
60. Which of the following is traditionally the major type of consumer loans for finance companies?
61. Which of the following observations concerning mortgages is NOT valid?
62. Compared to commercial banks, finance companies usually signal solvency and safety concerns by
63. A person with a history of bad credit and an inconsistent record of payments on other debt is most likely to
find a short-term loan through a
64. In contrast to earlier periods in the finance company industry, during the last decade
65. During 2006, originations of new subprime mortgages totaled approximately _________, which was
________ of new mortgages originated that year.