Deck 25: Consumer Law

Question 1

If you lease a car rather than buy one on credit,you still have statutory consumer protection.

Answer 1

True

Question 2

A company advertised a pain relief ointment called "Aspercreme." The package stated "the strong relief of aspirin right where you hurt." The product did not contain any aspirin.The FTC ruled that:

A) the advertising was not deceptive since the benefit of the product outweighed any harm caused by potentially misleading claims.
B) the advertising was misleading, and the company would have to change the name of the product or add aspirin to its formula.
C) the advertising was deceptive, and the FTC required the company to specifically state in its promotions that the product did not contain aspirin.
D) None of the above

Answer 2

C

Question 3

"Bait and switch" tactics are a violation of FTC rules.

Answer 3

True

Question 4

The most important federal agency involved in consumer protection is the Consumer Protection Agency.

Question 5

Company policy of PushOne,Inc.is for its representatives to block the company name and telephone number on potential customers' Caller ID systems so they won't know the call is from a telemarketer.This policy violates FTC rules.

Question 6

Employers must have permission from job applicants to request a consumer report.

Question 7

"Bait and switch" is:

A) advertising a product for sale and then giving a rain check.
B) placing the store brand and the national brand side-by-side in a store.
C) selling the store brand at a lower price than the national brand.
D) advertising goods, then pressuring the customer to buy other, more expensive goods.

Question 8

If the FTC determines a business has violated the law,it will normally try to get the business to voluntarily stop the activity.

Question 9

Monty applies for a $32,000 loan to purchase a truck for his family's use.This loan is subject to TILA disclosure requirements.

Question 10

The FTC can impose a fine for each violation of a voluntary compliance affidavit,a consent order,an FTC rule,or a cease and desist order,even one issued against someone else.

Question 11

The goal of the Consumer Product Safety Act is to provide injured consumers the right to obtain damages for dangerous or defective products.

Question 12

Millie ordered clothes from a mail order catalog.No time was specified as to when the goods would be shipped.In such a case the FTC requires that the company must ship the goods to Millie within:

A) 3 business days after receiving the order.
B) 10 business days after receiving the order.
C) 30 days after receipt of the order.
D) a reasonable time and within time lines consistent with industry standards.

Question 13

Prime Products,Inc.was going to be able to ship the comforter Margaret ordered within three weeks instead of the seven days it had originally promised.Prime must cancel Margaret's order and notify her that it can deliver within three weeks if she wants to reorder.

Question 14

The Truth-in-Lending Act applies to loan transactions made by someone in the business of offering credit.

Question 15

The Federal Trade Commission Act considers the terms "deceptive" and "unfair" synonymous when determining what practices should be prohibited.

Question 16

Don received in the mail merchandise he never ordered.The package was addressed to him,and when he opened it he saw a brochure stating he could keep the products for only $19.95.If he chose not to keep the products he was instructed to mail them back within five days.Don:

A) can keep and use the merchandise without having to pay for it.
B) can keep the merchandise only if he pays the $19. 95.
C) must send the merchandise back if he does not want it.
D) None of the above is correct.

Question 17

If an offending company refuses to stop its prohibited activity voluntarily,the next step for the FTC is to:

A) take the case to an administrative law judge within the agency.
B) take the case to the five-member board of the FTC Commissioners.
C) bring the case before a federal trial court of general jurisdiction.
D) seek an injunction in a state court.

Question 18

The Magnuson-Moss Warranty Act covers all consumer products regardless of their cost.

Question 19

The Equal Credit Opportunity Act makes it illegal for a lender to discriminate against a potential borrower because of race,national origin,religion,or sex,but it is permissible to treat a borrower differently if he or she is on welfare.

Question 20

Allowing consumers to place fraud alerts in their credit files has been an effective measure in preventing identity theft.

Question 21

MoneyMaker Toy Company violated the safety standards set forth by the Consumer Product Safety Commission when it produced a toy gun that caused injury to hundreds of children.Because of MoneyMaker's actions:

A) the CPSC can impose civil penalties on the company.
B) the CPSC can impose criminal penalties on the company.
C) users can sue for damages, including attorney's fees, if MoneyMaker knew it was violating a consumer product safety rule when it produced the guns.
D) All of the answers are correct.

Question 22

A debit card:

A) is legally like a credit card.
B) is also known as a check card.
C) if stolen subjects the owner to the same liability as a stolen credit card.
D) if stolen subjects to owner to responsibility for all losses if the theft is not reported to the bank within two days of discovering the theft.

Question 23

Which of the following statements expresses the purpose of the Truth-in-Lending Act?

A) To require lenders to charge a "reasonable" rate of interest.
B) To help small business.
C) To provide consumers with information necessary to make the best credit decision.
D) To help lenders limit state laws.

Question 24

The Fair Debt Collection Practices Act prohibits which of the following practices?

A) A debt collector falsely representing himself as a lawyer.
B) A debt collector telephoning the debtor at 8:00 a. m.
C) Visiting a debtor at work if the employer permits personal visits.
D) Using neighbors to locate the debtor.

Question 25

The Consumer Leasing Act requires a lessor to disclose in writing all EXCEPT:

A) number of payments.
B) penalties for late payments.
C) lease rates of the competition.
D) penalties for early termination.

Question 26

In a closed-end credit transaction:

A) the lender makes a series of loans with a maximum amount set before the first loan is made.
B) if the lender is offering a "teaser rate," this information must be clearly disclosed.
C) there is only one loan, and the borrower knows the amount and payment schedule in advance.
D) the Federal Reserve Board should be consulted before a lender is chosen.

Question 27

John loans George money and they sign a written agreement whereby George will repay John in monthly installments.Is this loan subject to the Truth-in-Lending Act?

A) Yes, if the loan is for more than $1,000.
B) Yes, if John and George live in different states.
C) No, if John is not in the business of offering credit.
D) No, if John and George are related.

Question 28

Under the TILA,consumers have the right to rescind a mortgage for up to:

A) five business days (Monday through Friday) after signing.
B) three business days (Monday through Saturday) after the signing.
C) three years from the date of the mortgage if the lender does not comply with the disclosure provisions of the TILA.
D) Both (a) and (c).
E) Both (b) and (c).

Question 29

Under FTC rules,a customer can cancel a door-to-door sales contract within:

A) three business days of the sale.
B) five business days of the sale.
C) one calendar week from the date the sale was made.
D) a "reasonable time" after the sale was made.

Question 30

Such a provision within the credit card contract is:

A) unconscionable.
B) an illegal contract of adhesion.
C) not binding, as a person cannot waive the statutory rights granted to him by federal credit card legislation.
D) valid unless state legislation prohibits such clauses.

Question 31

Grady receives a $2,940 credit card bill in the mail from a company with which he doesn't have an account.He fears he is a victim of identity theft.Does he have any recourse?

A) Yes, under the Fair and Accurate Credit Transactions Act (FACTA), Grady can place an alert in his credit files using the National Fraud Alert System.
B) Yes, under the Fair Credit Billing Act he may call the credit card company to complain about the bill, and the credit card company must investigate and correct any errors.
C) Yes, under the Truth in Lending Act, Grady is liable only for the first $50 in unauthorized charges.
D) No, he should have been more careful with his personal information so no one could have applied for credit in his name.

Question 32

If a consumer cancels a door-to-door sale within the required time,how many days does the seller have to return the buyer's money?

A) Three.
B) Ten.
C) Twenty-one.
D) Thirty.

Question 33

Lewis had a minimum payment of $87 due on March 12 for one of his credit cards.He was unable to send the payment until March 31,at which time he sent $100.With his next credit card statement,Lewis received notification that,because of his late payment,his interest rate on his outstanding balance would be increasing from its normal 14.99% to the default rate of 27.99%.His credit card company:

A) has the right to increase his interest rate because of the late payment.
B) violated the Credit Card Act of 2009.
C) may not increase his interest rate on outstanding balances unless Lewis is more than 60 days late in making his minimum payment.
D) may not increase his interest rate on outstanding balances because Lewis sent more than his minimum payment for March.
E) Both (b) and (c).

Question 34

Under the Credit Card Act of 2009,credit card companies are required to do all but which of the following?

A) Give notice at least 45 days before increasing the APR of a credit card.
B) Offer consumers the right to request an increased credit limit once in every 12-month period.
C) Apply any payments to whichever debt has the highest interest rate.
D) Set the same payment due date each month.

Question 35

What federal law applies to this particular situation?

A) Truth in Lending Act.
B) Fair Credit Billing Act.
C) Fair Credit Reporting Act.
D) Equal Credit Opportunity Act.

Question 36

If your wallet,which contained a credit card,was stolen and you called the credit card company immediately,your maximum liability would be?

A) Nothing.
B) $50.
C) $100.
D) Unlimited unless you had purchased a protection policy from the credit card issuer.

Question 37

Mabel is a single,40-year-old who has borrowed money on numerous occasions.Her payment record has been good,except she has been delinquent in paying a few bills.Which of the following is true regarding credit information gathered on Mabel?

A) As Mabel has been delinquent, she waives her right to see the credit files.
B) If Mabel is rejected for a loan because of the consumer report, the lender must tell her the source of the report.
C) Mabel has a right to have the information regarding her delinquency in paying a few loans stricken from her credit record because her record has generally been good.
D) Mabel's only legal remedy, if there is erroneous information in her credit file, is to report the problem to the FTC for enforcement.

Question 38

Under the TILA,for subprime mortgage loans,a lender:

A) may charge a prepayment penalty any time the loan is paid off before its due date.
B) must collect property taxes and homeowner's insurance for all first mortgages.
C) may not change the monthly payments during the period of the loan.
D) may consider the value of the mortgaged home as the sole asset in determining the homeowner's ability to repay the loan.

Question 39

A consumer report cannot include:

A) the fact that the consumer was discharged in bankruptcy eight years earlier.
B) information that the consumer failed to pay a lawn-care bill six years earlier.
C) a six-month-old investigative report discussing the consumer's lifestyle.
D) information that a consumer was late in paying a car loan three different months five years earlier.

Question 40

Consumers have a right to:

A) exclude as obsolete information about a bankruptcy discharge within seven years.
B) know the name of anyone to whom credit information has been supplied by a consumer reporting agency within the last three years.
C) have their own version of a disputed credit situation included in their credit file.
D) have their credit rating reviewed at least once a year.

Question 41

Commonground Collections has been hired to collect past-due medical bills for Lakeview Physicians.List some activities that Commonground may not do pursuant to the FDCPA.

Question 42

Explain the difference between a debit and a credit card and discuss the potential liability for a lost or stolen card.

Question 43

What are the three tests or elements used by the FTC to determine whether a particular act is an unfair trade practice?

Question 44

Richard received his credit card bill and noticed an error.He wrote to the company the next week,pointing out the error in his bill.Under the law,what is the credit card issuer's obligation once it receives Richard's letter?

Question 45

The Trimbles apply to Community Savings & Loan for a ten-year installment loan of $20,000 to remodel their kitchen.Discuss the disclosures Community is required to make.