What is the maximum down payment an alarm company owner can charge before starting?

• A. 5% of the contract price
• B. The lesser of $1,000 and 10% of the contract price excluding finance charges
• C. 15% of the contract price
• D. 20% of the contract price

Answer: (B)

The rule tests how much a company can collect as a down payment before starting work. There are two limits: a hard cap of $1,000 and a percentage-based cap of 10% of the contract price excluding finance charges. The amount you may charge up to before starting is the smaller of these two numbers. This protects consumers from large upfront payments while still allowing a reasonable down payment.

For example, if the contract price excluding financing is $7,000, 10% is $700, which is less than $1,000, so the maximum down payment is $700. If the price excluding finance charges is $12,000, 10% is $1,200, but the cap is $1,000, so the maximum down payment is $1,000.

This is why the correct rule is the lesser of $1,000 and 10% of the contract price excluding finance charges.