In credit card receivable aBS, principal cash flows can be altered only when the:
A) lockout period expires.
B) excess spread account is depleted.
C) early amortization provision is triggered.

Question

Quizplus · Accepted Answer

In credit card receivable ABS, the principal cash flows can be altered only when the early amortization provision is triggered. This provision is in place to protect investors in case of a rapid deterioration of the underlying credit quality, triggering a payout event to investors. The excess spread account is used to support this provision and to ensure that the necessary funds are available in case of an early amortization, but it does not directly impact the principal cash flows. The lockout period is a certain period of time during which the principal is not repaid to investors, but again, it does not impact the ability to alter the principal cash flows. Therefore, choice C is the best answer.

In Credit Card Receivable ABS, Principal Cash Flows Can Be