Penalty Settings are only available in Time Trial mode. To bring up the Penalty Settings menu, select "Settings" -> "Penalty Settings" from the Quick Menu. The Penalty Settings are as follows:

・ Shortcut Penalty
Set the level of penalty enforcement for when a driver takes a shortcut. Choose between "Off", "Weak", and "Strong".

・ Wall Collision Penalty
Select the penalty incurred when a car collides with a trackside wall. Choose between "Off", "Weak", and "Strong".