#1
When did consumer credit first emerge in history?
19th century
ExplanationConsumer credit emerged in the 19th century, marking a shift towards widespread borrowing for personal consumption.
#2
Which of the following is NOT a characteristic of credit unions?
Offering high-interest rates on loans
ExplanationCredit unions typically offer lower interest rates on loans compared to traditional banks, fostering member benefits and community-oriented financial services.
#3
What is the primary function of a credit reporting agency?
To collect and maintain credit information on individuals
ExplanationCredit reporting agencies gather and manage credit data, providing credit scores and reports to lenders to assess individuals' creditworthiness.
#4
Which of the following is NOT a factor typically considered in determining a person's credit score?
Income level
ExplanationWhile income level influences creditworthiness indirectly, it's not a direct factor in calculating credit scores, which focus on payment history, credit utilization, length of credit history, types of credit used, and new credit.
#5
What is the main function of a credit union?
To offer financial services to its members
ExplanationCredit unions provide a range of financial services, including savings accounts, loans, and other financial products, exclusively to their members, fostering community and cooperative banking.
#6
Which financial institution is considered the precursor to modern banks?
Pawnshops
ExplanationPawnshops served as precursors to modern banks, providing financial services such as lending money in exchange for collateral.
#7
Who introduced the concept of revolving credit in the United States?
American Express
ExplanationAmerican Express introduced the concept of revolving credit, allowing customers to carry balances over from month to month.
#8
What was the purpose of the Servicemen's Readjustment Act of 1944, commonly known as the GI Bill?
To provide educational and training benefits to veterans returning from World War II
ExplanationThe GI Bill aimed to facilitate the reintegration of veterans into civilian life by offering educational and training benefits, fostering economic growth.
#9
Who is often credited with the invention of the modern credit card?
Frank McNamara
ExplanationFrank McNamara is credited with the invention of the modern credit card through the creation of Diners Club, revolutionizing payment methods.
#10
Which legislation established the Consumer Financial Protection Bureau (CFPB) in the United States?
Dodd-Frank Wall Street Reform and Consumer Protection Act
ExplanationThe Dodd-Frank Act established the CFPB, aiming to protect consumers from abusive financial practices and promote transparency in financial services.
#11
Which act established the Federal Deposit Insurance Corporation (FDIC) in the United States?
Glass-Steagall Act
ExplanationThe Glass-Steagall Act established the FDIC, providing insurance for bank deposits and promoting stability in the banking system.
#12
What is the significance of the Gramm-Leach-Bliley Act (GLBA) in the history of consumer credit?
It repealed parts of the Glass-Steagall Act, allowing banks to engage in a broader range of activities
ExplanationThe GLBA repealed parts of the Glass-Steagall Act, enabling banks to diversify their activities, including in the realm of consumer credit.
#13
What is securitization in the context of consumer credit?
The process of converting loans into securities that can be traded on financial markets
ExplanationSecuritization involves bundling loans into securities, which are then sold to investors, thereby spreading risk and providing liquidity to lenders.
#14
What role did the Federal Housing Administration (FHA) play in the evolution of consumer credit?
It provided insurance on mortgage loans, making homeownership more accessible
ExplanationThe FHA facilitated homeownership by insuring mortgage loans, particularly for lower-income and first-time homebuyers, promoting stability in the housing market.
#15
What is the significance of the Dodd-Frank Wall Street Reform and Consumer Protection Act?
It established new regulations to prevent another financial crisis
ExplanationDodd-Frank introduced sweeping financial reforms, aiming to enhance market transparency, mitigate systemic risks, and protect consumers, following the 2008 financial crisis.