Deck 41: Consumer Protection

Question 1

On Monday, Bill agreed to buy aluminum siding for his home from Al, a door-to-door salesman. On Friday, he can rescind the contract with no liability for breach of contract.

Answer 1

False

Question 2

If a written limited warranty is given for a consumer product, it may state that there is no warranty of merchantability as long as this disclaimer is conspicuous.

Answer 2

False

Question 3

A consumer transaction would include one in which the purchaser uses the item at a hotel while on vacation.

Answer 3

True

Question 4

If an advertising statement is technically true but may tend to mislead, the FTC can still require a company to stop using it.

Question 5

The Truth-in-Lending Act would not require disclosure of the amount that would be due if the borrower had paid cash instead.

Question 6

The Truth-in-Lending Act establishes maximum amounts of interest that can be charged for credit cards.

Question 7

Under the Magnuson-Moss Warranty Act, if a store wishes to market a mini-camera for a retail cost of $5, it must give a written warranty.

Question 8

The Federal Trade Commission was created in 1968 in response to the consumer movement of the 1960s.

Question 9

The Magnuson-Moss Warranty Act applies to all sales of goods covered by the Uniform Commercial Code.

Question 10

If a manufacturer of a consumer product tells a buyer that he is selling it with no warranties, there is a violation of the Magnuson-Moss Warranty Act.

Question 11

A description of the finance charges that said "1.8% per month compounded daily" would comply with the rules of the Truth-in-Lending Act.

Question 12

Since 1981, the Consumer Product Safety Commission has relied primarily on mandatory safety standards.

Question 13

A collection agency may personally contact the debtor even if the debtor has engaged a lawyer to represent him.

Question 14

The Credit Card Fraud Act does not contain criminal penalties for violations of its provisions.

Question 15

One difference between a full and a limited warranty is that in a limited warranty, the manufacturer may, if reasonable, limit the warranty of merchantability to two years.

Question 16

Most states would invalidate prepayment penalties.

Question 17

In order to violate the FTC rules on advertising, a product would have to be affirmatively mislabeled.

Question 18

The Fair Credit Reporting Act applies to consumer reporting agencies.

Question 19

Stores may simply make warranties available to consumers upon request rather than including them on or in the packaged goods.

Question 20

The Federal Trade Commission enforces antitrust legislation.

Question 21

Federal regulation prohibits a credit seller or lender from obtaining a nonpossessory security interest in household goods if the interest is not a purchase money security interest.

Question 22

Lemon laws are generally understood to be laws that:

A) apply to the safety of food additives for fruits and vegetables.
B) are federal legislation designed specifically to protect state consumers from fraudulent car manufacturers.
C) are state laws that attempt to provide new car purchasers with rights that are similar to full warranties under the Magnuson-Moss Act.
D) are interstate compacts to uniformly deal with lemon cars.

Question 23

_{38. Congress enacted the to provide consumers who purchase a home with greater and more timely information}
On the nature and costs of the settlement process.

A) RESPA
B) CPSC
C) OSHA
D) FCCPA

Question 24

Discrimination based on in the extension of credit is prohibited under the Equal Credit Opportunity Act.

A) sex or marital status
B) religion or national origin
C) race or age
D) All of these.

Question 25

A cease and desist order, issued by the FTC, directs a party to stop a certain practice or face punishment, such as a fine.

Question 26

The Fair Debt Collection Practices Act applies directly to creditors.

Question 27

Ad substantiation, as required by an FTC policy statement, requires a company to have a reasonable basis for its claims at the time it makes the claims.

Question 28

Which of the following would NOT be considered to be an example of open-ended credit?

A) A gasoline credit card account
B) A VISA account
C) A real estate mortgage account
D) A department store credit card account

Question 29

Under the Consumer Credit Protection Act, a consumer has three days to withdraw from any credit obligation secured by a mortgage on his home, even if the contract was not the result of a door-to-door sale.

Question 30

The FTC Act contains very specific definitions of the terms "unfair" and "deceptive."

Question 31

A typical automobile financing agreement would be a closed-end credit agreement.

Question 32

Hazardous materials are specifically exempted from the jurisdiction of the Consumer Product Safety Commission.

Question 33

Under Truth-in-Lending, the cost of consumer credit must be expressed in an:

A) appreciated payment rate.
B) annual percentage rate.
C) appraisal payment ratio.
D) allocated procedures remedy.

Question 34

The FTC policy statement addressing the meaning of unfairness provides that an injury is unfair if it is:

A) likely to mislead the consumer.
B) substantial and not outweighed by any benefits to consumers or competition.
C) one that the seller could reasonably have avoided.
D) All of these.

Question 35

The Food and Drug Administration is the oldest federal consumer protection agency.

Question 36

The is empowered to issue industry-wide safety standards for consumer products.

A) UCCC
B) RESPA
C) FCCPA
D) CPSC

Question 37

There is a federal uniform lemon law that applies across the states to protect consumers in their purchase of new cars.

Question 38

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 forbids credit card issuers from raising interest rates or any fees during the first year a credit card account is open, and the Act states that gift cards or certificates may not expire sooner than five years after issuance.

Question 39

The Magnuson-Moss Warranty Act contains disclosure and labeling requirements for sellers of consumer products containing a written warranty.

Question 40

The Troubled Asset Relief Program enacted in 2008 was designed to strengthen the U.S. financial sector by governmental purchase of assets and equity from financial institutions.

Question 41

The National Highway Traffic Safety Administration:

A) seeks recalls on autos for safety reasons.
B) tests the fuel efficiency of each year's car models.
C) enforces trademark laws on cars and car parts to ensure buyers get what they think they are buying.
D) None of these are correct.

Question 42

The Fair Debt Collection Practices Act prohibits:

A) communication with a debtor who is represented by an attorney.
B) calls after 6 p.m.
C) contacting third persons to find out the whereabouts of a debtor.
D) a creditor from calling a debtor regarding payment of a bill.

Question 43

If the FTC rules that a seller has made a false or deceptive advertising statement, the Commission:

A) has no power to address the practice.
B) can require the seller to make additional advertisements to correct it.
C) can require the company to go out of business.
D) can report the company to the President of the United States for deregulation.

Question 44

Most lemon laws define a lemon as a car that:

A) was sold by a dealer who refuses to make reasonable attempts to correct the problem.
B) continues to have a defect that substantially impairs its use, value, or safety, even after the manufacturer has made reasonable attempts to correct the problem.
C) has been unpopular and so is sold at a discounted price.
D) a manufacturer must destroy so that it cannot be sold to other unsuspecting consumers.

Question 45

Under state law in many states and under the FTC rules and the federal Consumer Credit Protection Act, a contract solicited in a consumer's home may be canceled:

A) within 10 days by either party.
B) within 10 days by the consumer.
C) within three days by the consumer.
D) within 20 days by either party.

Question 46

Ellen, age 25, was recently divorced and has applied to Mayberry Bank for a loan. The bank, as regulated by the Equal Credit Opportunity Act:

A) can ask her if she is married.
B) can ask her if she plans to have children soon.
C) can discount her loan rating because she is 25 and likely to have children within the next five years.
D) must notify Ellen within 30 days after receiving her credit application of the action taken, and if she is denied credit, the bank must give her specific reasons for the denial.

Question 47

The Magnuson-Moss Warranty Act provides that:

A) a full warranty cannot disclaim any implied warranty.
B) a limited warranty can disclaim any implied warranty.
C) a full warranty cannot disclaim, but may modify or limit an implied warranty.
D) a limited warranty cannot limit the duration of any implied warranty

Question 48

_{44. The mandates clear disclosure of relevant credit information in consumer credit transactions. It requires}
Conspicuous disclosure of finance charges and interest rates calculated in a uniform manner.

A) Equal Credit Opportunity Act
B) Fair Credit Billing Act
C) Truth-in-Lending Act
D) FTC Act

Question 49

The Federal Trade Commission Act allows the FTC to:

A) determine what constitutes deceptive advertising practices.
B) prohibit all advertising in certain professions.
C) require advertisers to contribute to a fund to reimburse injured consumers.
D) require the independent testing of consumer goods.

Question 50

In order for advertising to be found deceptive by the FTC, it is necessary that:

A) the advertisement can only be reasonably interpreted in one way, and in that way, it is misleading.
B) there is a misrepresentation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer's detriment.
C) the sellers have malice or evil intent.
D) something affirmative was said which was misleading; i.e., an omission cannot be deceptive.

Question 51

The federal Truth-in-Lending law:

A) requires the lender to show how much profit is made on a particular sale.
B) regulates the maximum cost of credit.
C) is a uniform law made available to all states, like the UCC.
D) is intended to allow comparison of various credit offers or advertisements.

Question 52

Which of the following is not true about the Home Mortgage Disclosure Act?

A) It was enacted to emphasize to financial institutions the importance of their reinvesting funds in the communities they serve.
B) It was enacted to put redlining into effect.
C) It outlawed geographic discrimination.
D) It requires public disclosure of the financial institution's geographic pattern of mortgage lending.

Question 53

Which of the following best expresses the policy behind the Truth-in-Lending Act?

A) To help borrowers by requiring lenders to charge a "reasonable" rate of interest as determined by the Federal Reserve Board.
B) To help small business by prohibiting lenders from using, as collateral for secured loans, a business's most important assets.
C) To help debtors for loans for personal, family, household or agricultural purposes to be armed with the necessary information on a loan to better bargain for credit and to choose the creditor with the best terms.
D) To help lenders by permitting them to investigate a person's credit history without having to worry about state libel laws.

Question 54

Under the FCCPA, the liability of a credit card holder for another's unauthorized use of the card is limited to:

A) $500.
B) $100.
C) $50.
D) None of these; liability is unlimited.

Question 55

The Consumer Product Safety Commission:

A) only has the authority to educate the public concerning product safety problems.
B) uses data it gathers to set uniform product safety standards for goods such as toys and lawn mowers.
C) can only make manufacturers voluntarily submit their products for testing if the product falls below its ^{regulatory standards.}
D) has no enforcement powers since compliance with its regulations is left up to the manufacturer.

Question 56

The Truth-in-Lending Act:

A) applies only to such lenders as banks and savings and loans.
B) protects individuals who receive loans for more than $25,000, except for home mortgage loans.
C) is regulated by the FTC and the Federal Reserve Board under Regulation Z.
D) allows a buyer who is financing his home with a first mortgage to rescind that transaction within three days.

Question 57

The Fair Debt Collection Practices Act defines the following practices as abusive, EXCEPT:
A) a non-lawyer bill collector representing himself as a lawyer.

A)m.
B) a creditor, using his own name, telephoning the debtor at 7
C) a debt collector telephoning the debtor at inconvenient hours.
D) using obscene language.

Question 58

The Food and Drug Administration:

A) uses three basic methods of enforcement.
B) is a relatively recent agency, having been formed in 1976.
C) is the oldest federal consumer protection agency.
D) has no authority to require premarket approval of medical devices.

Question 59

When a debt is secured by property as collateral and the debtor defaults, the creditor may:

A) take possession of the property and retain it in full satisfaction of the debt or sell it.
B) take possession of the property and use it until the debtor pays the debt.
C) not take possession of the property, but must sue the debtor for the balance due.
D) None of these.

Question 60

A business, according to the FTC:

A) must disclose a product's country of origin.
B) may not have a salesperson make statements such as, "This is a great buy."
C) may use visual aids, such as adding marbles in a bowl of vegetable soup to make it look thick, when televising commercials.
D) All of these are correct.

Question 61

What are the remedies available for the Federal Trade Commission?

A) Affirmative exemption
B) Corrective advertising and multiple product orders
C) Impounding inventory
D) Fines and monetary penalties

Question 62

Most state attorneys general:

A) help to coordinate lawsuits against a company that has been engaging in fraudulent acts involving more than one state
B) are active in consumer protection by enforcing laws against consumer fraud through judicially imposed injunctions.
C) help consumers by enforcing laws that impose restitution.
D) All of these.

Question 63

In order for a full warranty to be given for a consumer product, the manufacturer must provide that:

A) the product will be repaired for free.
B) the warranty lasts for at least 10 days.
C) the consumer can opt for refund rather than repair.
D) consequential damage cannot be excluded.

Question 64

The Fair Credit Reporting Act has to do with:

A) allowing consumers to get their own credit report at no cost once a year
B) credit checks done by potential lenders.
C) reports made by credit agencies.
D) All of these.

Question 65

Under the Fair Credit Billing Act, if a consumer makes a complaint about the amount on his charge account bill, the store can:

A) immediately bar the customer from any further credit purchases.
B) report the unpaid amount to a credit-reporting agency as delinquent.
C) refer the matter to a collection agency for immediate collection.
D) None of these.

Question 66

The Fair Debt Collection Practices Act requires a debt collector to provide the consumer with a written notice. What information must be contained in this notice?

A) The amount of the debt, with interest and penalties clearly delineated
B) The name of the current creditor and former creditor
C) A statement informing the consumer that he can request verification of the alleged debt
D) A copy of the original credit contract with the original creditor

Question 67

The CFPA excludes from the Bureau of Consumer Financial Protection's authority the activities of all but which of the following?

A) Auto dealers
B) Check cashing businesses
C) Real estate brokers
D) Employee benefit plans

Question 68

If a debtor defaults on the minimum payment of a credit contract, all states would allow the creditor to:

A) impose a late charge.
B) garnish wages if there is a court proceeding to enforce the collection of a judgment.
C) Both of these.
D) None of these.

Question 69

Patricia, who is married to Dustin, applies for a credit card from Vankirk's Department Store, but she is turned down because she is a married woman and the store's policy is to issue cards only in the name of the husband in such situations. What are her legal rights in this situation?

Question 70

Clark goes to the First Bank to obtain a consumer loan. The bank requests that the Rich Credit Reporting Agency furnish a credit report, which they do. Based upon the report, which says that Clark has been convicted of theft and credit card fraud, the bank denies Clark's application. Is Clark entitled to know what was in the report? If Clark thinks the information in the report is inaccurate, what can he do?

Question 71

The FTC remedy of "affirmative disclosure" would require:

A) a new ad that admits the first ad was false.
B) providing certain information in a company's ads.
C) that the advertiser desist from deception in all products it markets.
D) All of these would be required.

Question 72

In a typical situation in which the FTC discovers a potentially deceptive practice, the FTC:

A) obtains a cease and desist order immediately, before any more damage is done.
B) investigates, files a complaint, and has a hearing in front of an ALJ.
C) requests a court hearing in the local federal trial court.
D) investigates and, if warranted, brings the matter before the five-member commission for issuance of a mandatory safety standard.

Question 73

Homemade Soup Co. has advertised their soup in certain magazines using photographs showing bowls of their soup but with pebbles at the bottom of the bowl. The pebbles were used to displace the soup in the bowl, forcing the vegetables and meat to the surface. This photographer's trick made the soup appear heartier than it was. An FTC staffer is thumbing through the latest edition of her favorite magazine. She notices the Homemade Soup Co. ad and goes to her kitchen, opens a can of Homemade's soup and decides that her bowl of soup looks nothing like the one in the ad. What are the steps the FTC would take to proceed against Homemade Soup Co.?

Question 74

What reported warranty problems caused Congress to enact the Magnuson-Moss Warranty Act?

A) Most warranties were not understandable.
B) Most warrantors disclaimed implied warranties.
C) The warrantors did not live up to their warranties.
D) All of these.

Question 75

The Credit Card Fraud Act prohibits which of the following practices?

A) Possessing unauthorized cards
B) Counterfeiting or altering credit cards
C) Using a card obtained from a third party with his consent when the third party conspires to report the cards as stolen
D) All of these.

Question 76

Ronald Beeb, who lives in Cleveland, receives a mailing from Florida from the SwampLand Reclamation Project. It states that the Beebs can purchase one-acre sites as part of a newly planned development of 200 lots located in Leon County, Florida. The Beebs contact the company and are given a purchase agreement but no additional information. They sign the purchase agreement and send it back. Then, a week later they decide they would prefer to winter in either New Zealand or Australia. Can the Beebs get out of the contract?

Question 77

Which of the following is not a purpose of the Consumer Product Safety Commission?

A) To create legislation imposing mandatory safety standards
B) To protect the public against unreasonable risks of injury associated with consumer products
C) To assist consumers in evaluating the comparative safety of consumer products
D) To develop uniform safety standards for consumer products

Question 78

Sue has a major store's credit card. On Monday she charged a $47.90 sweater and then lost the card. Myra found it Monday and charged a $100 scarf and $400 purse. Sue missed her card at 8
A) $47.90.

A)m. Tuesday and called the store. That day, Myra charged a coat for $4,000. Sue's bill was $4,547.90. Sue owes:
B) $547.90.
C) $97.90.
D) $4,547.90.

Question 79

Betty likes to shop using her credit cards.
a. What provisions of the Truth-in-Lending Act apply to the use of credit cards?
_{If Betty's account at Trevor's Department Store suddenly shows a $200 charge that she did not}
b. make and she notifies Trevor's in writing of the error, what must Trevor's do under the Fair
_{Credit Billing Act?}