Deck 18: Regulations Protecting Consumer Purchases, privacy, and Financial Activities

Question 1

Under a cease and desist order issued by the Bureau of Consumer Protection,a party consents to sign an order which restrains the promotional activity deemed offensive.

Answer 1

False
Explanation: Under the consent-order procedure, a party consents to sign an order that restrains the promotional activity deemed offensive and agrees to whatever remedy, if any, the Bureau imposes. Most cases brought by the Bureau are settled by this procedure.

Question 2

The Health Insurance Portability and Accountability Act applies only to physical records of patients' health care information.

Answer 2

False
Explanation: The Health Insurance Portability and Accountability Act (HIPAA) applies to both electronic and physical records. Enacted to standardize health care privacy, HIPAA protects individually identifiable health information by limiting how it can be used and disclosed by health plans, health care providers, and health care clearinghouses.

Question 3

The Truth-in-Lending Act covers transactions in which a debtor is a corporation or a business entity.

Answer 3

False
Explanation: The Truth-in-Lending Act covers all transactions in which: a) a lender is in the business of extending credit in connection with a loan of money, a sale of property, or the furnishing of services; b) a debtor is a natural person, as distinguished from a corporation or business entity; c) a finance charge may be imposed; and d) the credit is obtained primarily for personal, family, household, or agricultural purposes.

Question 4

Only if private remedies fail for violations of the Equal Credit Opportunity Act (ECOA),can the government bring suit to enjoin violations of the ECOA.

Question 5

Industry guides issued by the Federal Trade Commission are formal and legally binding.

Question 6

The Federal Trade Commission is the primary federal agency that protects consumers.

Question 7

Marie is an unmarried woman with a well-paid job.If she applies for credit solely at a bank in her own name,the bank is legally allowed to assign negative values on a credit checklist because of the fact that she is unmarried.

Question 8

The Magnuson-Moss Warranty Act requires the Federal Trade Commission to issue rules regarding warranties for consumer products.

Question 9

The Fair Credit Reporting Act regulates credit reports on both consumers and businesses.

Question 10

The Federal Trade Commission advises firms that request advice as to whether a proposed practice is unfair or deceptive.

Question 11

The Electronic Communications Privacy Act and Stored Communications Act protect all personally identifiable information.

Question 12

A plaintiff would have less flexibility making a claim under false and deceptive than she would making a claim under common law.

Question 13

The Federal Trade Commission is charged with eliminating competition to protect consumers.

Question 14

The main purpose of the Federal Trade Commission is to find violators and punish them.

Question 15

With regard to privacy,protections against intrusions by private actors are often limited to particular business contexts or certain forms of communications.

Question 16

Under the Right to Financial Privacy Act of 1978,an individual depositor has the right to challenge an agency's legal basis for seeking financial records.

Question 17

The Fair Credit Reporting Act provides that a report containing information solely as to transactions or experiences between a consumer and a person making the report is not a consumer report covered by the act.

Question 18

The president appoints the commissioners of the Federal Trade Commission for four-year terms.

Question 19

The Federal Trade Commission is the most significant enforcer of false and deceptive advertising laws.

Question 20

The Fair Credit Reporting Act eliminates the need for a potential employer to inform a job applicant that an investigative report is being obtained on him or her.

Question 21

The Equal Credit Opportunity Act applies to all businesses that regularly extend credit,including financial institutions,retail stores,and credit-card issuers.

Question 22

The Consumer Financial Protection Bureau regulates insurance companies.

Question 23

Under bankruptcy laws,certain creditors receive priority over others in the distribution of a debtor's assets.

Question 24

The Federal Food,Drug,and Cosmetic Act is administered by the Federal Trade Commission.

Question 25

______ ensures fair competition by preventing those who would deceive consumers from diverting trade from those who compete honestly.

A) trade practice regulation
B) redlining procedure
C) resale price maintenance
D) restraint of trade
E) full-line forcing

Question 26

The familiar telemarketing sales rule that established the national "Do Not Call" list is an example of a(n)______.

A) Congressional statute
B) trade regulation rule
C) executive order of the president
D) Uniform Commercial Code rule
E) procedural law

Question 27

In a bankruptcy proceeding against an individual,the individual's property can be liquidated under Chapter 7 of the bankruptcy law.

Question 28

The bankruptcy laws are subject to regulatory interpretation.

Question 29

Among the costs frequently paid by debtors that are not included in the finance charge are recording fees and taxes.

Question 30

In a bankruptcy proceeding,the debts are either liquidated under Chapter 7 or adjusted under Chapter 13 of the bankruptcy law.

Question 31

The regulatory center for federal consumer protection is the ______.

A) United States Consumer Product Safety Commission
B) Bureau of Consumer Protection
C) Federal Consumer Protection Agency
D) Bureau of Consumer Trade
E) Department of Consumer Affairs

Question 32

The Fair Debt Collection Practices Act exempts attorneys who collect consumer debts on behalf of their clients.

Question 33

In a bankruptcy proceeding,a voluntary petition is one filed by a creditor.

Question 34

The Bureau of Consumer Protection may allege that an individual or company has violated Section 5 of the Federal Trade Commission Act,which prohibits unfair or deceptive acts or practices.The alleged individual or company is called a(n)______.

A) respondent
B) claimant
C) appellant
D) plaintiff
E) pursuer

Question 35

According to the Fair Debt Collection Practices Act,a collector must only telephone a debtor before 8:00
A.M. or after 9:00 P.M. so as to not disturb the debtor while he or she is at work.

Question 36

The Magnuson-Moss Warranty Act establishes rules for resolving billing disputes with a credit card issuer.

Question 37

The trustee in bankruptcy is elected by a debtor to represent the debtor's estate in taking possession of and liquidating the debtor's property.

Question 38

According to the Fair Debt Collection Practices Act,a debt collector is not required to disclose his or her identity as a debt collector to debtors when attempting to collect a legitimate,delinquent debt.

Question 39

The Fair Debt Collection Practices Act applies only to consumer debt collections.

Question 40

In the context of the Magnuson-Moss Warranty Act,under full warranties,a warrantor does not have to replace a defective product,if a buyer of the product does not pay shipping costs.

Question 41

Which of the following statements is true of the Children's Online Privacy Protection Act?

A) It prohibits the creation of websites intended to target children.
B) It permits companies to collect information on children over the age of 10 without the need for consent of the parents.
C) It prohibits market research agencies from soliciting children under the age of 13 without the consent of the federal government.
D) It prohibits online advertisers from creating advertisements targeting children under the age of 10.
E) It prohibits the online collection of information on children under the age of 13 without a parent's consent.

Question 42

Which of the following statements is true of the Truth-in-Lending Simplification Act?

A) It restricts statutory penalties to failures to disclose credit terms that are of material importance in credit comparisons.
B) It requires statutory penalties to be based purely on technical violations of the act.
C) It eliminates the need for model disclosure forms issued by the government.
D) It restricts state laws from allowing private lawsuits against deceptive advertisements.
E) It prohibits companies from the practice of redlining.

Question 43

Which of the following statements is most likely to be true when the Federal Trade Commission (FTC)is very laissez-faire?

A) The FTC does not regulate most advertising.
B) The FTC tends not to regulate traditional frauds.
C) The FTC commissioners tend to be more consumer-oriented.
D) The FTC will increase the number of deceptive cases filed.
E) The FTC limits the role of markets in regulating advertising.

Question 44

Which of the following statements is true of the Federal Trade Commission's (FTC's)penalties or remedies?

A) The basic penalty for trade practice violations under the FTC Act is a civil fine of not more than $1,000 per violation.
B) The FTC's main purpose is to find violators and punish them.
C) Either the FTC or the Justice Department must ask the federal court to assess all civil fines including fines accepted by companies that are imposed as part of a consent order.
D) Civil fines may be assessed by courts only under two distinct situations: for a violation of a consent or cease and desist order or for a violation of a trade regulation rule.
E) The FTC Act states that in the case of a violation through continuing failure to obey an order, each day the violation continues is a separate offense.

Question 45

Which of the following is the limitation of the Electronic Communications Privacy Act?

A) It permits the interception of broadcast radio communications.
B) It allows the interception of emails by another without authorization.
C) It severely limits all business communications.
D) It protects all personally identifiable information, which limits business activities.
E) It does not apply to the privacy of communications stored on a server.

Question 46

ECNAL Corp.manufactures bicycle parts.One of its new products,the Slipstream tire,is advertised to be 20 percent stronger than that of its competitors due to a new rubber compound used that makes the tires skid resistant.After receiving complaints of fraud,the Federal Trade Commission (FTC)determines that the tire is made from rubber similar to that found in most bicycle tires and is not skid resistant.The FTC orders ECNAL to run an ad admitting that its advertisements were misleading and remove the untrue information from its advertisements.In this scenario,which of the following remedies is used by the FTC?

A) corrective advertising
B) cease and desist advertising
C) comparative advertising
D) parody advertising
E) social advertising

Question 47

The ______,passed by the European Parliament in 1995,mandates that companies may collect personal information only with consent,keep it only as long as necessary,and transfer to third parties only with permission.

A) Safe Harbor Directive
B) Encryption Networks Directive
C) Data Protection Directive
D) Information Transfer Safety Directive
E) Information Network Directive

Question 48

The basic penalty for trade practice violations under the Federal Trade Commission Act is a civil fine of not more than ______.

A) $16,000 per violation
B) $36,000 per violation
C) $90,000 per violation
D) $200,000 per violation
E) $500,000 per violation

Question 49

Which of the following act's purpose is to prevent discrimination in credit extension?

A) the Federal Trade Commission Act
B) the Fair Credit Reporting Act
C) the Truth-in-Lending Act
D) the Fair Debt Collection Practices Act
E) the Equal Credit Opportunity Act

Question 50

To determine deception in advertising,the Federal Trade Commission

A) looks at an ad from the point of view of a reasonable seller.
B) looks at both implied and express claims.
C) ignores what an ad does not say.
D) looks at an ad from the point of view of a reasonable advertiser.
E) ignores the pictures but focuses on certain words and phrases.

Question 51

The Equal Credit Opportunity Act is aimed especially at preventing ______.

A) race discrimination
B) age discrimination
C) sex discrimination
D) marital status discrimination
E) religion discrimination

Question 52

The ______ of 1974 places constraints on how certain kinds of information collected by the federal government can be used and limits those to whom the information may be released.

A) Fair Credit Reporting Act
B) Clayton Act
C) Sherman Act
D) Sarbanes-Oxley Act
E) Privacy Act

Question 53

The Video Privacy Protection Act prevents the disclosure of personally identifiable information concerning video rentals and includes a right of civil action with a minimum liquidated damages provision of ______.

A) $2,500
B) $5,500
C) $10,000
D) $12,500
E) $20,000

Question 54

Which of the following acts requires the government to issue model disclosure forms?

A) Equal Credit Opportunity Act
B) Stored Communications Act
C) Electronic Communications Privacy Act
D) Federal Trade Commission Act
E) Truth-in-Lending Simplification Act

Question 55

To obtain civil fines,either the Federal Trade Commission (FTC)or the Justice Department must ask the federal court to assess them.The exception to this rule is when companies

A) violate a cease and desist order.
B) agree to fines as part of a cease and desist order.
C) knowingly violate a prior FTC order against others.
D) violate a trade regulation rule.
E) agree to fines as part of a consent order.

Question 56

Most cases brought by the Bureau of Consumer Protection are settled using ______.

A) the cease and desist order
B) arbitration
C) extradition
D) an injunction
E) the consent-order procedure

Question 57

BrightCave is a local retail store that regularly extends credit to its customers.William,an African American,is denied credit by the store.He believes that the store has discriminated against him based on his race.In this scenario,BrightCave violates the ______.

A) Federal Trade Commission Act
B) Fair Credit Reporting Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth-in-Lending Act

Question 58

Big Prime Inc.is a leading investment bank.Big Prime lends money to more men than women as it believes men are more likely to pay back their loans.In this case, Big Prime violates the ______.

A) Federal Trade Commission Act
B) Fair Credit Reporting Act
C) Truth-in-Lending Act
D) Fair Debt Collection Practices Act
E) Equal Credit Opportunity Act

Question 59

In the context of false advertising laws,state law

A) may allow for private lawsuits in addition to government enforcement, which is an option not available under the Federal Trade Commission Act.
B) ignores material claims in deceptive advertising unlike the Federal Trade Commission Act.
C) ignores express claims made in deceptive advertising unlike the Federal Trade Commission Act.
D) only prosecutes violators who make implied claims in their advertising unlike the Federal Trade Commission Act.
E) uses remedies such as corrective advertising to accompany some of its orders, which is an option not available under the Federal Trade Commission Act.

Question 60

Section 5 of the ______ prohibits unfair or deceptive acts or business practices.

A) Equal Credit Opportunity Act
B) Fair Credit Reporting Act
C) Truth-in-Lending Act
D) Fair Debt Collection Practices Act
E) Federal Trade Commission Act

Question 61

If there are violations of the Equal Credit Opportunity Act (ECOA),affected consumers

A) have the right to file a petition to the president to seek some form of remedy.
B) can recover punitive damages only in the presence of actual damages.
C) can recover punitive damages up to $100,000.
D) have the right to seek public enforcement by the Federal Trade Commission.
E) have to depend on the government to ensure they have equal opportunities for credit as they cannot pursue private remedies.

Question 62

Infro Inc.is a major lender.It plans to include the zip codes of its customers as a major factor when offering loans.This allows Infro to reduce the amount of risk it takes by not providing loans in certain areas where property values are low.In this case,which of the following statements is true?

A) Before Infro implements its decision, it must obtain permission from the Federal Trade Commission to do so.
B) If Infro goes through with its decision, it is engaging in redlining.
C) The decision of Infro is legal under the provisions of the Equal Credit Opportunity Act.
D) Before Infro implements its decision, it must specify the minimum average property value a person must have before applying for a loan.
E) If Infro goes through with its decision, it is engaging in inclusionary zoning which is legal.

Question 63

DrakeAuto Corp.is an automobile dealer that offers flexible payment plans for its customers.However,DrakeAuto requires its customers over 60 years of age to make the payment in full.In this case,DrakeAuto violates the ______.

A) Federal Trade Commission Act
B) Equal Credit Opportunity Act
C) Truth-in-Lending Act
D) Fair Debt Collection Practices Act
E) Fair Credit Reporting Act

Question 64

The Truth-in-Lending Act gives debtors the right to rescind certain transactions for a period of ______ business days from the date of the transactions or from the date they are given the notice of their right to rescind,whichever is later.

A) seven
B) eight
C) three
D) nine
E) five

Question 65

Which of the following statements is true of the limitation of the Fair Credit Reporting Act?

A) If a bank passes along any information it received from an outside source about its customer, then its credit report is not covered by the act.
B) If a bank reports only as to its own experiences, it would come under the act.
C) If a bank furnishes information about a customer related to its transactions, it would come under the act.
D) If a bank passes on information it collected from credit reporting agencies that used several sources, it would not come under the act.
E) If a bank gave its opinion as to the creditworthiness of a customer in question, it would come under the act.

Question 66

Which of the following acts establishes procedures that banks and other financial institutions must follow when consumers dispute amounts billed by a bank?

A) the Electronic Fund Transfer Act
B) the Fair Credit Reporting Act
C) the Magnuson-Moss Warranty Act
D) the Federal Trade Commission Act
E) the Equal Credit Opportunity Act

Question 67

______,usually one of the first actions of a debt collector to locate a debtor,may require that the collector contact third parties who know of the debtor's whereabouts.

A) Predatory conduct
B) Judicial restraint
C) Prior restraint
D) Redlining
E) Skip-tracing

Question 68

______ are reports on a consumer's character,general reputation,mode of living,and so on,obtained by personal interviews in the consumer's community.

A) Credit reports
B) Consumer policy reports
C) Market research reports on consumers
D) Arbitrative consumer relations reports
E) Investigative consumer reports

Question 69

Private remedies for violation of the Equal Credit Opportunity Act include recovery of punitive damages up to ______.

A) $100,000
B) $50,000
C) $10,000
D) $20,000
E) $500,000

Question 70

The Fair Credit Reporting Act applies to anyone who prepares or uses a credit report in connection with

A) opening a bank account.
B) promoting an employee.
C) selling real estate.
D) granting a business license.
E) extending credit.

Question 71

Under the Fair Credit Reporting Act (FCRA),investigative consumer reports detailing a consumer's character,general reputation,and mode of living

A) may be obtained without any restriction should the consumer apply for a credit, an insurance, an accounting, or a finance-related job.
B) may be obtained by no one unless at least three days' advance notice is given to the consumer that such a report will be sought.
C) can be sought only with the permission of the Federal Trade Commission.
D) are prohibited because they are not credit-related issues.
E) are prohibited because they violate the right to privacy of the consumer.

Question 72

Among the costs frequently paid by debtors to creditors as a condition of the extension of credit,which of the following are included in the finance charge?

A) title insurance fees
B) abstract fees
C) attorney's fees for preparing deeds
D) notary fees
E) fees for appraisals

Question 73

Which of the following statements is true of the Fair Debt Collection Practices Act?

A) It permits debt collectors to contact a third party, even if an attorney representing a debtor responds to all communications by the collector.
B) It permits debt collectors to contact third parties; the collectors must disclose that they are pursuing a debt against a consumer but may not disclose the nature or amount of the debt.
C) It permits debt collectors to contact third parties; the collectors must disclose that they are pursuing a debt against a consumer and may also disclose the nature or amount of the debt.
D) It forbids debt collectors from contacting third parties regardless of the disclosure or nondisclosure of the existence of a consumer's debt.
E) It permits debt collectors to contact third parties, but the debt collector may not state that the consumer owes a debt.

Question 74

Which of the following statements is true of redlining?

A) It refers to the practice in which real estate brokers guide prospective home buyers toward or away from certain neighborhoods based on their race.
B) It refers to the perceived business practice of a company providing a product or a service based on the customer lifetime value.
C) It refers to a way of encouraging white owners of property to sell their houses at a loss by implying that racial minorities were moving into their previously racially segregated neighborhood, thus depressing real estate property values.
D) It refers to an organization targeting its minority consumers by charging them more for services or products when compared to the charges for its non-minority consumers.
E) It refers to the refusal of an organization to make loans at all in certain areas where property values are low.

Question 75

Which of the following statements is true of the penalties and remedies under the Truth-in-Lending Act?

A) There are no criminal penalties for violation of the Truth-in-Lending Act.
B) The criminal liability provisions make creditors liable to debtors for an amount equal to thrice the finance charge.
C) The civil liability provisions may allow creditors to be liable to debtors for an amount neither less than $4,000 nor more than $40,000 for a closed-end real estate transaction.
D) Creditors may avoid liability in the event they make an error, provided they notify a debtor within sixty days after discovering the error and also correct the error.
E) Creditors, in certain cases, may be allowed to collect finance charges in excess of those actually disclosed.

Question 76

DN Corp.is a credit reporting agency.DN Corp.furnishes an investigative consumer report about Nicole,a candidate,who is seeking employment at Zenith Corp.,a financial institution.Nicole is given a week's notice that such a report will be generated by DN Corp.as part of Zenith's hiring process.DN Corp.follows reasonable procedure when collecting information about Nicole.However,Nicole realizes that the report contains false information about her.In this scenario,which of the following is most likely to be true?

A) Nicole can sue DN Corp. for furnishing false information as it violates the Fair Credit Reporting Act.
B) Nicole can sue Zenith Corp. for requesting an investigative consumer report.
C) Nicole cannot file a libel action against DN Corp. for furnishing false information regardless of whether the investigative procedures were reasonable or not.
D) DN Corp. is not liable to Nicole as it followed reasonable procedures.
E) DN Corp. is protected by the Fair Credit Reporting Act against any liability regardless of whether the investigative procedures were reasonable or not.

Question 77

The ______ provision of the Fair Credit Reporting Act requires that consumers who are seeking credit for personal,family,or household purposes be informed if their application is denied because of an adverse credit report.

A) server
B) subscriber
C) access
D) content
E) user

Question 78

The ______ is the sum of all charges payable directly or indirectly by the debtor or someone else to the creditor as a condition of the extension of credit.

A) annual percentage rate
B) funding charge rate
C) commercial charge
D) service charge
E) finance charge

Question 79

The ______ requires that a lender disclose the finance charge,expressing it as an annual percentage rate,and specifies the methods for making this computation.

A) Equal Credit Opportunity Act
B) Truth-in-Lending Act
C) Fair Credit Reporting Act
D) Magnuson-Moss Warranty Act
E) Fair Debt Collection Practices Act

Question 80

Subprime mortgages refer to mortgages securing loans for consumers

A) at an interest rate lower than the prime interest rate established by the Federal Reserve Bank.
B) who own property that cannot pass a reasonable safety inspection.
C) with excellent credit worthiness at a lower than ordinary market rate.
D) who do not qualify for ordinary market rates due to a lack of credit worthiness.
E) with excellent credit worthiness at a zero rate of interest.