Deck 24: Consumer Protection

Question 1

A business that cannot provide scientific evidence to support its marketing claims may be held liable for deceptive advertising.

Answer 1

True

Question 2

Advertising will be deemed deceptive if it includes a claim that omits a material fact about a product.

Answer 2

True

Question 3

Half-truths-information that is true but incomplete-are not deceptive because such statements are at least half true.

Answer 3

False

Question 4

A false statement or unjustified claim about a competitor's products can result in liability for deceptive advertising.

Question 5

The Telemarketing Sales Rule applies to any offer-domestic or foreign-made to consumers in the United States.

Question 6

A consumer may recover under a state consumer-fraud statute, even if he or she has not suffered actual damages proximately caused by a deceptive act.

Question 7

The Federal Commerce Commission is charged with the goal of preventing unfair and deceptive trade practices.

Question 8

Generally, online ads-unlike other ads-can be less than truthful and not every claim must be substantiated.

Question 9

An ad is more likely to be considered fair if its benefit to consumers or the competition outweighs any injury it might cause to the interests of consumers.

Question 10

Federal law does not require food product labels to identify the product.

Question 11

Deceptive advertising occurs if a reasonable consumer believes an advertising claim.

Question 12

The Federal Trade Commission actively monitors online advertising.

Question 13

The Lanham Act protects against the deceptive use of trademarks but does not cover false advertising claims.

Question 14

Bait-and-switch advertising occurs if the seller fails to have reasonably adequate quantities of the advertised item available.

Question 15

Labels must be accurate and use words easily understood by the ordinary consumer.

Question 16

An obviously exaggerated advertising claim will be considered deceptive even if a reasonable consumer would not believe it to be true.

Question 17

Shipping times promised in ads are estimates-merchants are not required to notify consumers when orders cannot be shipped as timely as promised.

Question 18

Because consumers may not read an entire web page, an online disclosure should be placed as close as possible to any claim being qualified.

Question 19

A deceptive ad for a product involving wrongful charges to consumers may result in an award of damages of a defendant's unjust gains and consumers' losses.

Question 20

If an advertisement is proven to be deceptive, it may be subject to a cease-and-desist order.

Question 21

There is a significant distinction between regulating the information dispensed about a product and regulating the product's actual content.

Question 22

Federal law regulates the use of such terms as low fat on food labels.

Question 23

A creditor can always require the signature of a cosigner on a credit application.

Question 24

Federal and state laws are aimed at protecting consumers from all of the following except

A) unfair trade practices.
B) unsafe products.
C) unreasonable credit requirements.
D) unwise purchases.

Question 25

Hearth & Home Furniture store advertises bedroom suites at a "Special Low Price of $599." When Ilene tries to buy one of the suites, Jill, the salesperson, tells her that they are all sold and no more are obtainable. Jill adds that Hearth & Home has other bedroom suites available for as low as $2,599. This is

A) a cease-and-desist order.
B) bait-and-switch advertising.
C) counteradvertising.
D) puffery.

Question 26

A debt-collection agency can always contact a debtor at his or her place of employment.

Question 27

Credit can be denied solely on the basis of national origin.

Question 28

Regulation Z was issued by the Federal Reserve Board of Governors to implement the disclosure requirements of the Truth-in-Lending Act.

Question 29

Faux Products Inc., in its ads, makes false claims about its own products and about the products of its competitors. The firm may be subject to sanctions for the false claims about

A) its products only.
B) its competitors' products only.
C) its products and its competitors' products.
D) none of the choices.

Question 30

Lawnscape Company and Mowers Inc. make yard tools. Both companies use only steel produced in the United States. Lawnscape's ad claims, "We use only U.S. steel, while our competitor uses inferior foreign steel!" Under the advertising standards of the Federal Trade Commission Act, this statement is most likely

A) an obvious exaggeration.
B) puffery.
C) a false claim about a competitor's product.
D) a half-truth.

Question 31

The Truth-in-Lending Act applies to a loan between two consumers because in that transaction, the lender is a person who in the ordinary course of business is extending credit.

Question 32

Creditors that use information from credit-reporting agencies cannot be held liable for violations of the Fair Credit Reporting Act.

Question 33

With respect to tainted foods, the focus of federal regulators has shifted from responding to incidents of contamination to preventing them.

Question 34

The government cannot remove a product from the market simply because it is considered imminently hazardous.

Question 35

The Federal Food, Drug, and Cosmetic Act protects consumers against contaminated and misbranded food and drugs.

Question 36

The manufacture and sale of any product that poses an unreasonable risk to consumers can be banned.

Question 37

Importers of food do not have to verify that the imported food meets U.S. safety standards.

Question 38

The quality and safety of food may be important to consumers, but food labels that provide standard nutrition facts are a seller's option, not a requirement.

Question 39

Under the Fair Credit Reporting Act, a consumer can request the identity of anyone who has received a credit agency's report on the consumer.

Question 40

Consumer Staples Inc. includes in its advertising obvious exaggerations, vague generalities, and puffery about its products. The firm may be subject to sanctions for

A) obvious exaggerations.
B) vague generalities.
C) puffery.
D) none of the choices.

Question 41

Spicy Salsa Inc. complains to the Federal Trade Commission (FTC) about an ad broadcast by Tangy Taco Sauce Company, Spicy's competitor. The FTC investigates and concludes that the ad is deceptive. The FTC's next step is to

A) conduct negotiations between the competitors.
B) draft a formal complaint.
C) issue a cease-and-desist order.
D) permit Spicy to broadcast similarly deceptive counteradvertising.

Question 42

Credit Loan Company extends credit in the ordinary course of its business. Under the Truth-in-Lending Act, Credit Loan must inform potential borrowers of

A) credit terms offered by other lenders.
B) comparative prices for goods to be bought with the borrowed funds.
C) Credit Loan's credit terms.
D) the borrowers' credit scores.

Question 43

An ad for Running Shoes Inc. states that its footwear is "The Winner's Choice." Because of this ad, the Federal Trade Commission is most likely to issue

A) a cease-and-desist order.
B) a counteradvertising order.
C) a settlement.
D) none of the choices.

Question 44

Mattress Company advertises a special sale-all bedding, half price. The ad does not state that the sale price does not include delivery or shipping costs. To avoid claims of deceptive advertising, Mattress should

A) clearly and conspicuously disclose the shipping cost in its ads.
B) display the shipping cost in small print on ads displayed in stores.
C) include the shipping cost in small print on its receipts.
D) not reveal the shipping cost.

Question 45

Value Loan Company extends credit to consumers. Value Loan applies a variety of requirements to determine applicants' qualifications for credit, the amount, the interest rate, and other terms. Under the Equal Credit Opportunity Act, the lender cannot base its credit decisions on an applicant's

A) credibility.
B) financial awareness.
C) occupation.
D) gender.

Question 46

EZ Workout Inc. advertises Fit Step, an exercise machine, online. In its ads, EZ claims that the use of Fit Step measurably enhances the attainability of fitness and weight loss goals, and will contribute significantly to the length of its users' lives. In this context, the company's ads and claims must be

A) hyperlinked.
B) avoidable.
C) substantiated.
D) all of the choices.

Question 47

Bee borrows funds from Credit Union to repair her home and to buy a car. She buys a laptop from Discount Store in a transaction financed by the seller. If these parties are subject to the Truth-in-Lending Act, Regulation Z applies to

A) the car loan only.
B) the home repair loan only.
C) the retail installment sale only.
D) the car loan, the home repair loan, and the retail installment sale.

Question 48

Direct Sales Corporation sells products to consumers over the phone, through the mail, and online. Under the Federal Trade Commission's Mail or Telephone Order Merchandise Rule, the firm may be liable for failing to

A) ship orders within the time promised in its ads.
B) notify consumers when orders are shipped.
C) provide a cooling-off period of three days before shipping.
D) all of the choices.

Question 49

The Federal Trade Commission (FTC) receives numerous complaints that a Renewal Subscriptions Inc. ad is deceptive. The FTC's first step is to

A) draft a formal complaint.
B) investigate.
C) issue a cease-and-desist order.
D) refer the complaints to the U.S. Department of Justice.

Question 50

Creamery Inc. makes and sells dairy products. Creamery's product packages must include

A) the company owner's identity.
B) the contents' net quantity.
C) the restaurants and stores in which the product is sold.
D) the type of consumer most likely interested in the product.

Question 51

An ad for Bagels Inc. attracts buyers who would otherwise have made purchases from Croissant Company. To bring a successful claim against Bagels under the federal Lanham Act for false advertising, Croissant must establish that

A) the ad was false or deceptive.
B) the buyers were deceived by the ad.
C) the ad directly caused Croissant to lose sales.
D) all of the choices.

Question 52

Pro Motor Company makes cars. Federal law requires Pro to attach a label that includes the Environmental Protection Agency's fuel economy estimate for a vehicle to

A) every new car.
B) no car-compliance with the law is voluntary.
C) select old and new cars.
D) every car.

Question 53

Teri borrows $10,000 from USA Bank to remodel a room in her home. This transaction is subject to

A) no federal law.
B) the Consumer Leasing Act.
C) the Consumer Product Safety Act.
D) the Truth-in-Lending Act.

Question 54

Quik Mart sells groceries. Rite Price sells groceries and fills prescriptions. The party with the chief responsibility to prevent unsafe food and drugs from being sold is

A) Quik Mart and Rite Price.
B) the Consumer Product Safety Commission.
C) the Federal Trade Commission.
D) the Food and Drug Administration.

Question 55

Whole Grains Company wants to make and market new processed bread and cereal products. On each product's label, standard nutrition facts are

A) prohibited.
B) required.
C) voluntary.
D) discretionary.

Question 56

ChemCo Inc. makes and sells products containing ingredients potentially hazardous to consumers. The government agency that has the authority to order ChemCo to remove a product from the market is

A) the Consumer Product Safety Commission.
B) none of the choices.
C) the Federal Trade Commission.
D) the Food and Drug Administration.

Question 57

Mai receives an unsolicited credit card in the mail and tosses it on her desk. Without Mai's permission, her roommate Nan uses the card to buy a new laptop for $1,800. Mai is liable for

A) $1,800.
B) $500.
C) $50.
D) none of the choices.

Question 58

The federal agency that oversees the practices of banks, mortgage lenders, and credit-card companies is

A) Regulation Z.
B) the Federal Reserve Board.
C) the Consumer Product Safety Commission.
D) the Consumer Financial Protection Bureau

Question 59

Greg signs an installment contract with Home Appliance Store to finance the purchase of new kitchen appliances. This transaction is subject to

A) no federal law.
B) the Fair Credit Reporting Act.
C) the Telecommunications Act.
D) the Truth-in-Lending Act.

Question 60

Home Made Inc. advertises a variety of household products online. In this context, the company's ads must be

A) truthful.
B) forceful.
C) colorful.
D) all of the choices.

Question 61

QT Collection Agency calls Rob several times a day, and in the middle of the night, about an overdue bill that Standard Credit Company turned over to QT for collection. This is a violation of

A) no federal law.
B) the Fair and Accurate Credit Transactions Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.

Question 62

Lu's application to Metro Bank for a credit card is denied. Lu can obtain information on his credit history in a credit agency's files under

A) no federal law.
B) the Equal Credit Opportunity Act.
C) the Fair Credit Reporting Act.
D) the Fair Debt Collection Practices Act.

Question 63

Kip opens an account at Lotsa Goodies, and buys a digital music player and other items, but makes no payments on the account. To collect the debt, a Lotsa Goodies representative contacts Kip's parents. This violates

A) no federal law.
B) the Fair and Accurate Credit Transactions Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.

Question 64

Sugar Treats Company wants to sell its candy in a normal-sized package labeled "Gigantic Size." Tony Fabrics Inc. wants to advertise its sweaters as having "That Wool Feel," but does not want to specify on labels that the sweaters are 100 percent polyester. Can these firms market products as they would like? If not, why not?

Question 65

The credit department of Mega-Mart often calls Nora at work about an overdue bill over the objection of Nora's employer. This is a violation of

A) no federal law.
B) the Fair and Accurate Credit Transactions Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.

Question 66

Tia takes out a loan from Urban Bank. When she fails to make the scheduled payments, the lender advises her of further action that it will take. This violates

A) no federal law.
B) the Fair and Accurate Credit Transactions Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.

Question 67

Auto & Life Insurance Company fails to notify its new customers when they are charged higher premium rates as a result of their credit scores. This is a willful violation of

A) the Equal Credit Opportunity Act.
B) the Fair Credit Reporting Act.
C) state law, but no federal law.
D) the Fair Debt Collection Practices Act.

Question 68

Leo's application to Metro Bank for a credit card is denied on the basis of what Leo believes is an inaccurate credit report. Leo should

A) immediately apply for a credit card with a different financial institution.
B) appeal the denial to the appropriate federal or state agency.
C) obtain his credit report and notify the reporting agency of inaccuracies.
D) file a suit against the bank, alleging a violation of federal credit laws.

Question 69

Credit Agency Corporation issues consumer credit reports. The company generally does not delete unverifiable or erroneous information from the reports. Under the Fair Credit Reporting Act, this firm may be subject to

A) finance charges.
B) damages.
C) a cease-and-desist order.
D) no sanctions.

Question 70

Owen buys a restored 1969 Dodge Charger from Prime Restorations Inc. on credit but makes no payments on the account. Quentin, the owner of Prime Restorations, calls Owen at home on a Monday morning at three A.M. Quentin represents himself as RiteNow Collection Agency and demands payment "or else." The next day, Quentin sends Owen notice that he has thirty days to request verification of the debt, during which its payment will be suspended, but that if he does not pay the full amount due within five business days, Quentin will arrange for the "destruction of Owen's good credit rating." Which laws has Quentin violated, if any, and in what ways?

Question 71

Rollo has a credit card from Shopping Cards Inc. To change the terms, Shopping Cards must

A) impose double-cycle billing.
B) give Rollo advance notice.
C) send monthly bills twenty-one days before the change.
D) increase the interest rate only retroactively.

Question 72

Consumer Finance Corporation (CFC) extends credit to consumers. CFC applies several criteria to decide customers' "suitability" for credit. Under the Equal Credit Opportunity Act, CFC cannot base its decision on a customer's

A) intelligence.
B) education.
C) culture.
D) race.