Deck 45: 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

One difference between a full and a limited warranty under the Magnuson-Moss Warranty Act is that in a limited warranty, the manufacturer may, if reasonable, limit the duration of the warranty of merchantability.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

The Truth-in-Lending Act requires disclosure of the cost of credit as an annual percentage rate, which may be calculated in one of three different ways.

Question 6

On Monday, Bill agreed to buy aluminum 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 7

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

Question 8

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

Question 9

The United States Postal Service plays an important role in consumer protection as it files many cases to close down mail fraud operations.

Question 10

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 11

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 12

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

Question 13

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

Question 14

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

Question 15

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.

Question 16

Consumer protection takes place by legislation and agencies at only the federal level.

Question 17

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

Question 18

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 19

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

Question 20

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 21

Under 2009 amendments to the Truth in Lending Act, credit card companies cannot increase their interest rate unless they give customers 120 days' notice.

Question 22

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

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

The FTC has issued three policy statements addressing the meaning of unfairness and has provided that an injury is unfair if:

A)when applying a cost-benefit analysis to the situation, the costs are lower than the benefits to consumers or competition.
B)it is substantial and not outweighed by any benefits to consumers or competition.
C)it is one that consumers themselves could not reasonably have avoided.
D)Both (a) and (b) are correct.
E)Both (b) and (c) are correct.

Question 28

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

Question 29

Under Truth-in-Lending Act, 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 30

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 31

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 32

The Truth-in-Lending Act has disclosure requirements for both consumer loans and credit sales over $25,000.

Question 33

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

Question 34

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

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

Question 35

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

Question 36

The Fair Debt Collection Practices Act applies directly to creditors.

Question 37

The Consumer Product Safety Commission is made up of three commissioners.

Question 38

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

Question 39

Lemon laws provide new car purchasers with rights similar to those under the Magnuson-Moss Warranty Act.

Question 40

Ad substantiation, as required by an FTC policy statement, requires a company to survey consumers to test their perception of a product.

Question 41

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)$75.
C)$50.
D)None of the above; liability is unlimited.

Question 42

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 43

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 manufacturers responsible for seeing that drugs are proven safe and effective before being sold.
D)make package inserts or labels on drugs list possible side effects.

Question 44

The Fair Debt Collection Practices Act defines all of the following practices as abusive, EXCEPT:
A)unfair means to collect a debt.

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

Question 45

Enforcement and interpretation of the Truth-in-Lending Act was given to the:

A)Commerce Department.
B)Justice Department.
C)Federal Trade Commission.
D)Federal Reserve Board.

Question 46

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 47

The Fair Debt Collection Practices Act prohibits:

A)a debt collection agency from communicating directly with a debtor under any circumstances.
B)calls after 6 p.m.
C)a debt collection agency from calling a debtor each day, several times a day, demanding payment.
D)a creditor from calling a debtor regarding payment of a bill.

Question 48

Which of the following acts mandates clear disclosure of relevant credit information in consumer credit transactions? It requires conspicuous disclosure of finance charges and that interest rates be 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

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

Question 50

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 51

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

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

Question 52

ARM disclosure rules apply to any loan that is:

A)an open-ended consumer transaction.
B)secured with real or personal property.
C)longer than one year in duration.
D)All of the above.

Question 53

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 54

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 55

The National Highway Traffic Safety Administration:

A)recalls 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 56

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 order a false or misleading advertisement to be stopped through a "cease and desist order," but cannot require the violator to correct its advertising.
C)can fine an advertiser for running a misleading advertisement if it fails to comply with its order to "cease and desist."
D)All of these are correct.

Question 57

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

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

Question 58

The federal Truth-in-Lending Act:

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 59

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)have no enforcement powers since compliance with its regulations is left up to the manufacturer.

Question 60

The Consumer Product Safety Commission enforces the:

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

Question 61

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

Question 62

Under the Credit Card Accountability, Responsibility, and Disclosure Act:

A)a customer must be more than ninety days overdue on payment before the credit card company may impose a penalty rate increase on an existing debt.
B)if a credit card company lawfully increases its interest rate on a customer because of overdue payments, the rate must be restored to the prior rate if the customer makes at least the minimum payment on time for the next six months.
C)credit card companies must mail account statements 24 days prior to the payment due date.
D)if the credit card company receives payment after 3 p.m., the payment may be credited the following business day.

Question 63

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 and phone number of the current creditor and former creditor.
C)A statement telling the consumer that he can request verification of the alleged debt.
D)A copy of the original credit contract with the original creditor.

Question 64

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 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 65

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 the above.
E)Two of the above, (b) and (c), are correct.

Question 66

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)take possession of the property securing the debt and sell it.
D)All of the above.
E)(a) and (c) are correct.

Question 67

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)Both (b) and (c) are correct.
E)Both (a) and (b) are correct.

Question 68

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

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

Question 69

The Truth-in-Lending Act:

A)applies only to such lenders as banks and savings and loans.
B)prohibits inclusion of inaccurate or specified obsolete information in consumer reports.
C)is regulated by 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 70

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

A)do nothing.
B)require the seller to make additional advertisements to correct it.
C)require the company to go out of business.
D)report the company to the President of the United States for deregulation.

Question 71

What remedies are available for the Federal Trade Commission?

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

Question 72

The Equal Credit Opportunity Act would not prohibit which of the following?

A)First Bank refuses to extend credit to females.
B)First Bank refuses to extend credit to men over 70 years of age.
C)First Bank refuses to extend credit to people with incomes below $10,000.
D)First Bank refuses to extend credit to people from Italy.

Question 73

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 ad.
C)that the advertiser desist from deception in all products it markets.
D)All of the above would be required.

Question 74

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)$47.90.

A)m.Tuesday and called the store.Myra then 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 75

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 requiring that lenders not use as collateral for secured loans a business's most important assets.
C)To help debtors for loans for personal, family, household, or agricultural 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.
D)To help lenders by permitting them to investigate a person's credit history without having to worry about state libel laws.

Question 76

Discuss ARMs and their regulation.

Question 77

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

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

Question 78

Discuss the role of the state attorneys general in consumer protection.

Question 79

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 replacement if the product is unsatisfactory.
D)consequential damage cannot be excluded.

Question 80

Roscoe Braun, who lives in Cleveland, receives a mailing from Florida from the SwampLand and Reclamation Project.It states that the Brauns can purchase one-acre sites as part of a newly planned development located in Leon County, Florida.The Brauns 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 Brauns get out of the contract?