Deck 44: Consumer Protection

Question 1

Ad substantiation does not require advertisers to have a reasonable basis for their claims at the time the claims were made.

Answer 1

False

Question 2

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

Answer 2

False

Question 3

A misrepresentation or material omission that is likely to mislead a consumer to the consumer's detriment is grounds for a claim of deception under FTC rules.

Answer 3

True

Question 4

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

Question 5

The Consumer Financial Protection Bureau is an independent executive agency housed within the Federal Reserve and was established to regulate consumer financial products or services solely under the Consumer Financial Protection Act of 2010.

Question 6

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 Act.

Question 7

The Credit Card Fraud Act contains criminal penalties for violations of its provisions.

Question 8

The Federal Trade Commission has overall enforcement authority for the Equal Credit Opportunity Act.

Question 9

Deception may occur either through false representation or material omission.

Question 10

The NHTSA has the authority to set motor vehicle safety standards that promote crash prevention.

Question 11

The FTC has the power to seek in a federal district court a preliminary injunction, pending completion of administrative proceedings, whenever the agency has reason to believe that a person has been violating FTC rules.

Question 12

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

Question 13

When first established, the Consumer Product Safety Commission promulgated a number of mandatory safety standards.

Question 14

The United States Postal Service plays an important role in consumer protection.

Question 15

A warranty creates a duty on the seller's part that the goods and services she sells will conform to certain qualities, characteristics, or conditions.

Question 16

A collection agency may not personally contact the debtor if the debtor has engaged a lawyer to represent him.

Question 17

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

Question 18

The Gramm-Leach-Bliley Financial Modernization Act is administered and enforced solely through two federal agencies: the SEC and FTC.

Question 19

An employer must notify a job applicant or current employee that a credit report may be used and must obtain the applicant's consent prior to requesting an individual's credit report from a credit bureau.

Question 20

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

Question 21

The Truth-in-Lending Act has disclosure requirements for both consumer loans and credit sales over $50,000.

Question 22

Under the Fair Credit Reporting Act, a consumer has the right to have inaccurate information removed from his consumer credit report.

Question 23

Nathan borrows $1,250 to pay his son's medical bills.This is not a consumer credit transaction subject to the FCCPA since the loan is for a family member's services rather than for Nathan's personal purchase of goods.

Question 24

The Interstate Land Sales Full Disclosure Act has been repealed because it was no longer needed.

Question 25

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 26

Some states have broadened their lemon law coverage to include used cars and motorcycles.

Question 27

In most states, a consumer is legally obligated once he has signed a contract, unless he rescinds the binding credit obligation within two to three days if the sale was solicited in his house.

Question 28

According to the FTC, Internet search engines' failure  to distinguish paid advertising from natural search results clearly and prominently could be a deceptive practice.

Question 29

The Mortgage Reform and Anti-Predatory Lending Act of 2010 sets minimum underwriting standards for mortgages and prohibits mandatory arbitration clauses and prepayment penalties for ARMs.

Question 30

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

Question 31

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

Question 32

The Dodd-Frank Act reduces the amount of funds authorized for TARP and requires that TARP funds repaid by financial institutions be used for government deficit reduction.

Question 33

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

Question 34

The Consumer Financial Protection Bureau replaced the federal consumer financial regulatory system which had been split among the Office of the Comptroller of the Currency, Office of Thrift Supervision, FDIC, Federal Reserve, National Credit Union Administration, HUD, and the FTC.

Question 35

The FCC's Open Internet rules imposing net neutrality by regulating fixed and mobile broadband service providers as utilities were struck down  in a divided decision of a three-judge panel at the U.S.Court of Appeals for the District of Columbia Circuit .

Question 36

The Consumer Financial Protection Bureau has rulemaking, supervisory, and enforcement authority over all but which of the following?

A) Persons engaged in extending credit and servicing loans.
B) Automobile dealers.
C) Check cashing establishments.
D) Persons engaged in deposit-taking activities.
E) Consumer credit report providers.

Question 37

The Fair Debt Collection Practices Act applies directly to creditors.

Question 38

The FCC's Open Internet rules protect and maintain open, uninhibited access to legal online content by prohibiting broadband internet access providers from blocking or slowing the delivery of internet content.

Question 39

Regulations for the 2009 Credit Card Accountability, Responsibility, and Disclosure Act (CARD) include that credit card issuers must mail account statements 21 days prior to the payment due date and that credit card issuers are prohibited from giving credit cards to full-time college students under 21 years old unless the student can prove the means to pay or a parent/guardian cosigns for the card.

Question 40

The Consumer Product Safety Commission cannot issue an order banning a hazardous product from the market.

Question 41

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

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

Question 42

Lemon laws are generally understood to be laws that:

A) are federal legislation designed specifically to protect state consumers from fraudulent car manufacturers.
B) are Interstate Compacts to uniformly deal with lemon cars.
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) apply to the safety of food additives for fruits and vegetables.

Question 43

The Consumer Product Safety Commission enforces the:

A) Flammable Fabrics Act.
B) Federal Hazardous Substances Act.
C) Refrigerator Safety Act.
D) All of these.
E) None of these.

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) a manufacturer must destroy so that it cannot be sold to other unsuspecting consumers.
D) has been unpopular and so is sold at a discounted price.

Question 45

The federal Truth-in-Lending law:

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

Question 46

Since 1976, the Food and Drug Administration has had the increased authority to:

A) subject medical devices to premarket approval.
B) require manufacturers to do corrective advertising.
C) make package inserts or labels on drugs list possible side effects.
D) make manufacturers responsible for seeing that drugs are proven safe and effective before being sold.

Question 47

The FTC:

A) and an advertiser can enter into a consent decree to force the advertiser to both stop the running of the advertisement and to publicly admit its advertisement was deceptive.
B) can fine an advertiser for running a misleading advertisement if it fails to comply with its order to "cease and desist."
C) can order a false or misleading advertisement to be stopped through a "cease and desist order," but cannot require the violator to correct its advertising.
D) All of these are correct.

Question 48

The National Highway Traffic Safety Administration:

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

Question 49

Which of the following is empowered to issue industry-wide safety standards for consumer products?

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

Question 50

When the creditor has been notified that a credit card was lost, the liability of the credit card holder is limited to:

A) $100.
B) $50.
C) $75.
D) None of these; liability is unlimited.

Question 51

In 1974, Congress enacted what law 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 52

Under the Fair Credit Reporting Act:

A) credit reports may be used by potential employers and lenders, but not insurers.
B) consumer reporting agencies must notify consumers, orally or in writing, before making an investigative report.
C) upon request, each nationwide consumer reporting company must provide a free copy of an individual's credit report once every 12 months.
D) if a consumer does not agree with information in the file and so notifies the reporting agency, the agency must reinvestigate the matter, even if the agency thinks the complaint is frivolous or irrelevant.

Question 53

The Fair Debt Collection Practices Act defines all of the following practices as abusive, EXCEPT:

A) falsely representing that a lawsuit is about to be filed.
B) using obscene language.
C) telephoning the debtor at 8:00 a.m.
D) unfair means to collect a debt.

Question 54

Which of the following acts protects consumers who have errors in credit card billings?

A) Equal Credit Opportunity Act.
B) Truth-in-Lending Act.
C) Fair Credit Billing Act.
D) Fair Debt Collection Practices Act.

Question 55

The Consumer Product Safety Commission:

A) have no enforcement powers since compliance with its regulations is left up to the manufacturer.
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) only has the authority to educate the public concerning product safety problems.

Question 56

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 within:

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

Question 57

Which of the following acts requires disclosure of finance charges in terms of an annual percentage rate and requires that interest rates be calculated in a uniform manner in consumer credit transactions?

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

Question 58

The Equal Credit Opportunity Act prohibits discrimination based on what factors in the extension of credit?

A) Religion, national origin, and age.
B) Sex, marital status, or race.
C) Income, occupation, or apparent stability.
D) Both race and age.

Question 59

Enforcement and interpretation of the Truth-in-Lending Act is now the responsibility of the:

A) Federal Reserve Board.
B) Consumer Financial Protection Bureau.
C) Federal Trade Commission.
D) Justice Department.

Question 60

The Home Equity Loan Consumer Protection Act:

A) forbids the creditor from accelerating the outstanding balance of the loan if the consumer fails to make payments on time.
B) defines a principal dwelling to include second or vacation homes.
C) amends the Truth-in-Lending Act to require that lenders provide a disclosure statement to potential borrowers at least five days before they receive an application for the loan.
D) only covers loans with adjustable rate mortgages.

Question 61

If a debtor defaults on a credit contract, the creditor may:

A) impose a late charge.
B) garnish wages if there has been a court proceeding to enforce collection of a judgment.
C) declare the entire balance of the debt immediately due and may sue on the debt.
D) All of these.
E) Both  impose a late charge and  declare the entire balance of the debt immediately due and sue on the debt.

Question 62

Congress outlawed the practice of redlining through what legislation?

A) The Equal Credit Opportunity Act.
B) The Gramm-Leach-Bliley Financial Modernization Act.
C) The Home Mortgage Disclosure Act.
D) The Dodd-Frank Act.

Question 63

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

A) consequential damage cannot be excluded.
B) the consumer can opt for replacement if the product is unsatisfactory.
C) the warranty lasts for at least 10 days.
D) the product will be repaired for free.

Question 64

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

A) To help lenders by permitting them to investigate a person's credit history without having to worry about state libel laws.
B) To help small business by requiring that lenders not use as collateral for secured loans a business's most important assets.
C) To help borrowers by requiring lenders to charge a "reasonable" rate of interest as determined by the Federal Reserve Board.
D) To help debtors for loans for personal, family, or household purpose to be armed with the necessary information on a loan to better bargain for credit and to choose the creditor with the best terms.

Question 65

A collection agency is prohibited from:

A) calling the debtor from 5-6 p.m. when he is likely to be eating dinner.
B) threatening to sue if it actually intends to do so.
C) calling the debtor in the middle of the night.
D) contacting third persons to find out the whereabouts of a debtor.

Question 66

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

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

Question 67

The Interstate Land Sales Full Disclosure Act (ILSA) applies to sales or leases of one hundred or more lots of unimproved land as part of a common promotional plan in interstate commerce.The Act:

A) pro-vides that a purchaser or lessee may revoke any contract or agreement for sale or lease at her option within seven days of signing the contract and that the contract must clearly pro-vide this right.
B) requires  a developer to file with HUD a detailed "statement of record" containing specified information about the subdivision and the developer before offering the lots for sale or lease.
C) is administered by  the Consumer Financial Protection Bureau.
D) All of these statements are true.

Question 68

Remedies available to the FTC for violations of unfair and deceptive trade practices include:

A) affirmative disclosure.
B) multiple product orders.
C) corrective advertising.
D) All of these.

Question 69

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

Question 70

Under the Fair Credit Billing Act, if a consumer reports an error in the amount on his charge account bill, until the creditor responds, it cannot:

A) restrict the use of an open-ended credit account because the disputed amount is unpaid.
B) report the disputed amount as delinquent.
C) take any action to collect the disputed amount.
D) All of these are correct.

Question 71

The Equal Credit Opportunity Act would not prohibit which of the following? First Bank refuses to extend credit to:

A) men over 70 years of age.
B) people with incomes below $10,000.
C) females.
D) people from Italy.

Question 72

The Federal Trade Commission Act allows the FTC to:

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

Question 73

The Federal Consumer Credit Protection Act:

A) Sets limits on garnishment proceedings.
B) Requires creditors to disclose finance charges.
C) Does not yet require disclosure on credit extension charges.
D) Requires creditors to disclose finance charges  but  does not require disclosure on credit extension charges.
E) S ets limits on garnishment proceedings. and also  requires creditors to disclose finance charges.

Question 74

What remedies are available for the Federal Trade Commission?

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

Question 75

Sue has a Bloomingdale'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.m.Tuesday and called the store.Myra then charged a coat for $4,000.Sue's bill was $4,547.90.Sue owes:

A) $97.90.
B) $47.90.
C) $547.90.
D) $4,547.90.

Question 76

Northstar Sporting Goods sells consumer goods to Lena for $85 and provides a written warranty regarding the quality of the goods.Northstar:

A) may modify the implied warranties.
B) may disclaim any and all implied warranties as long as the disclaimer is conspicuous.
C) must designate the warranty as full or limited.
D) All of these are correct.

Question 77

Homemade Soup Co.has advertised their soup in certain magazines using photographs showing bowls of their soup 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 up a bowl 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 78

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

A) require the company to go out of business.
B) report the company to the President of the United States for deregulation.
C) require the seller to make additional advertisements to correct it.
D) as a first course of action fine the seller and, if that is not effective, file suit in federal court.

Question 79

The FTC remedy of "affirmative disclosure" would require:

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

Question 80

The Fair Credit Reporting Act has to do with:

A) bills that are incorrectly added.
B) credit checks done by potential lenders.
C) reports made by credit agencies.
D) All of these.
E) reports made by credit agencies and also  credit checks done by potential lenders.