Deck 25: Consumer Law

Question 1

A consumer law is a statute or administrative rule serving to protect consumer interests.

Answer 1

True
Explanation: A consumer law is a statute or administrative rule serving to protect consumer interests.

Question 2

The Telephone Consumer Protection Act makes it illegal to transmit advertisements via fax unless the recipient agrees to the fax transmission.

Answer 2

True
Explanation: The TCPA makes it illegal to transmit advertisements via fax unless the recipient agrees to the fax transmission.

Question 3

State laws in regard to protection of purchasers of used-cars are preempted by federal law.

Answer 3

False
Explanation: Consumer protections against fraud in used-car sales vary widely from state to state.

Question 4

Under the Equal Credit Opportunity Act, creditors may require that a spouse co-sign a loan application regardless of the credit worthiness of the applicant.

Question 5

The existence of deceptive advertisements is enough alone to prove damages for recovery when individual civil suits are filed for deceptive practices.

Question 6

The Federal Trade Commission has ____________ commissioners each of whom serves a _____________-year term.

A) 5; 7
B) 7; 3
C) 9; 4
D) 8; 5
E) 3; 4

Question 7

Which of the following is a statement in which a company agrees with the Federal Trade Commission to stop disputed behavior but does not admit it broke the law?

A) Agreed stoppage
B) Command order
C) Consent order
D) Agreed order
E) None of these because the Federal Trade Commission provides no such option

Question 8

Which of the following does the Federal Trade Commission require if a company wishes to claim that its products are "Made in the U.S.A."?

A) That the claim not be used unless all, or virtually all, of the product's components and labor are of U.S. origin.
B) That the claim not be used unless absolutely all of the components and labor of the product are of U.S. origin.
C) That the claim not be used unless at least 75% of the product's components and labor are of U.S. origin.
D) That the claim not be used unless at least 50% of the product's components and labor are of U.S. origin.
E) That the claim not be used unless at least 55% of the product's labor and components are from Canada, Mexico, or the United States.

Question 9

Under the Equal Credit Opportunity Act, creditors may not deny credit on the basis that the applicant receives public assistance benefits.

Question 10

Puffery is allowed in China, very similarly to the standard used in the U.S.

Question 11

Which of the following was the result on appeal in American Italian Pasta Company v. New World Pasta Company, the case in the text involving whether the phrase "America's favorite pasta" by the American Italian Pasta Company was deceptive advertising?

A) The court found the phrase deceptive because a reasonable person would likely interpret the phrase as an objective fact and no factual data to substantiate the claim was available.
B) The court found the phrase deceptive because no disclaimer was made.
C) The court found the phrase deceptive because no return policy was available.
D) The court did not find the phrase deceptive ruling that it was puffery and did not involve statements of fact.
E) The court did not find the phrase deceptive because the complaining party could not show a loss of profits based on the use of the phrase.

Question 12

Which of the following is the term used for the requirement of the Federal Trade Commission that advertisers have a reasonable basis for claims made in advertisements?

A) Ad substantiation
B) Ad verification
C) Proof of ad veracity
D) Illustration of ad veracity
E) Acknowledgement of ad veracity

Question 13

Congress repealed the law prohibiting the sale of highly flammable clothing.

Question 14

The law in Quebec requires that if a product is sold in Quebec, its packaging and product instructions are to be in French alone.

Question 15

Which of the following is the term used when an advertisement is true but incomplete?

A) Inaccurate truth
B) Rule 8(a) violation
C) Rule 3 violation
D) Significant untruth
E) Half-truth

Question 16

The Consumer Product Safety Commission lacks the authority to issue product recalls on its own.

Question 17

Congress created the Federal Trade Commission (FTC) through the Federal Trade Commission Act of ________________________.

A) 1900
B) 1914
C) 1929
D) 1934
E) 1976

Question 18

Which of the following was the ruling by a majority of the U.S. Supreme Court in Food and Drug Administration Et Al. v. Brown & Williamson Tobacco Corporation Et Al., the case in the text involving whether the Food and Drug Administration has jurisdiction to regulate tobacco products?

A) That the Food and Drug Administration has jurisdiction over tobacco products.
B) That the Food and Drug Administration has jurisdiction over tobacco products only to the extent that any advertisement may be directed to children.
C) That the Food and Drug Administration has jurisdiction over tobacco products only to the extent that it may regulate warnings on packages of tobacco products.
D) That the Food and Drug Administration does not have jurisdiction over tobacco products.
E) That the Food and Drug Administration does not have jurisdiction over tobacco products unless deceptive advertising is involved.

Question 19

What type of agency is the Federal Trade Commission?

A) Executive
B) Independent
C) Collateral
D) Approved
E) Certified

Question 20

Which of the following are interpretations of consumer laws created by the Federal Trade Commission to encourage businesses to stop unlawful behavior?

A) Consumer guides
B) Consumer recommendations
C) Business interpretations
D) Industry guides
E) Business requirements

Question 21

Which of the following is the appropriate term for a requirement by the Federal Trade Commission that a company run advertisements in which the company explicitly states that formerly advertised claims were untrue?

A) Corrective advertising
B) Repeal advertising
C) Notice publication
D) Notice advertising
E) Action publication

Question 22

If a credit card company sends a person an unsolicited card in the mail and the card is stolen, for how much can the person be held liable to the credit card company?

A) $500
B) $300
C) $250
D) $200
E) 0

Question 23

Which of the following does the Federal Trade Commission consider abusive action by telemarketers?

A) Using profane or obscene language toward a customer.
B) Calling a person who has previously requested to be taken off the particular seller's calling list.
C) Calling a residence before 8 a.m.
D) Using profane or obscene language toward a customer, calling a person who has previously requested to be taken off the particular seller's calling list, and calling a residence before 8 a.m.
E) Using profane or obscene language toward a customer and calling a person who has previously requested to be taken off the particular seller's calling list, but not calling a residence before 8 a.m.

Question 24

Which of the following is false regarding the Telephone Consumer Protection Act of 1991?

A) It forbids telephone solicitation using an automatic telephone dialing system.
B) It forbids telephone solicitation using a prerecorded voice.
C) It makes it illegal to transmit advertisements via fax unless the recipient agrees to the fax transmission.
D) Only the Federal Communications Commission can take action to enforce the act.
E) If a telemarketer willfully violates the act, the court can decide to triple the amount owed to the consumer.

Question 25

Which of the following is true regarding the obligation, if any, of a consumer who discovers that a company has sent the consumer unsolicited merchandise?

A) The consumer may treat the merchandise as a gift.
B) The consumer may only treat the merchandise as a gift if it has a value of under $25; otherwise, the consumer must call the seller and ask if the seller would like to cover return postage.
C) The consumer may only treat the merchandise as a gift if it has a value of under $50; otherwise, the consumer must call the seller and ask if the seller would like to cover return postage.
D) The consumer may only treat the merchandise as a gift if it has a value of under $100; otherwise, the consumer must call the seller and ask if the seller would like to cover return postage.
E) The consumer must return the merchandise.

Question 26

Under which of the following circumstances may a credit card company not bill a consumer for a damaged item that is unknowingly purchased with the card?

A) The consumer purchased the item in the same state as the consumer's home or within 100 miles of the consumer's home.
B) The consumer purchased the item in the same state as the consumer's home or within 100 miles of the consumer's home, and the item cost more than $50.
C) The consumer purchased the item in the same state as the consumer's home or within 100 miles of the consumer's home; the item cost more than $50; and the consumer made a good-faith effort to resolve the dispute, such as asking the store for a refund.
D) The consumer purchased the item in the same state as the consumer's home or within 100 miles of the consumer's home; the item cost more than $50; the consumer made a good-faith effort to resolve the dispute, such as asking the store for a refund; and the seller had a history of providing defective merchandise.
E) The credit card company may always charge the consumer, and it is up to the consumer to get a refund from the merchant.

Question 27

Which of the following is required by the Federal Trade Commission Cooling-Off Rule in regard to door-to-door sales?

A) That consumers have three days in which to cancel purchases made from salespeople who come to their homes.
B) That the salesperson notify the consumer, both verbally and in writing that the sales transaction may be cancelled.
C) That the consumer be notified in writing in the same language in which the oral negotiations were conducted.
D) That consumers have three days in which to cancel purchases made from salespeople who come to their homes; that the salesperson notify the consumer, both verbally and in writing that the sales transaction may be cancelled; and that the consumer be notified in writing in the same language in which the oral negotiations were conducted.
E) That consumers have three days in which to cancel purchases made from salespeople who come to their homes and that the salesperson notify the consumer in writing in the same language in which oral negotiations were conducted that the transaction may be cancelled, but not that notification also be made verbally.

Question 28

Which of the following is true regarding regulation of tobacco under federal law?

A) Radio advertisement of cigarettes is prohibited.
B) Radio advertisement of smokeless tobacco is prohibited.
C) Television advertisement of smokeless tobacco is prohibited.
D) Radio advertisement of cigarettes is prohibited, radio advertisement of smokeless tobacco is prohibited, and television advertisement of smokeless tobacco is prohibited.
E) Radio advertisement of cigarettes is prohibited and television advertisement of smokeless tobacco is prohibited, but radio advertisement of smokeless tobacco is allowed.

Question 29

Which of the following is not a federal law referenced in the text regulating product labeling?

A) The Wool Products Labeling Act
B) The Fur Products Labeling Act
C) The Flammable Fabrics Act
D) The Nutrition Labeling and Education Act
E) The Imported Canine and Feline Fur Act

Question 30

Which of the following permits repeated transactions and assesses a finance charge on unpaid balances?

A) Open-ended credit
B) Closed-ended credit
C) Debt-based credit
D) Uncollateralized credit
E) Collateralized credit

Question 31

If a person notifies the credit card company of a stolen card before unauthorized charges are made, for how much can the person be held liable to the credit card company for later unauthorized charges?

A) $500
B) $300
C) $250
D) $200
E) 0

Question 32

Which of the following must be true in order for a loan to come within the protection of the Truth-in-Lending Act?

A) The credit or loan must be subject to a finance charge.
B) The credit or loan must have repayments of more than four installments.
C) The credit or loan must have an interest rate of over 5%.
D) The credit or loan must be subject to a finance charge, or credit or loan must have repayments of more than four installments, and the credit or loan must have an interest rate of over 5%.
E) The credit or loan must be subject to a finance charge or have repayments of more than four installments, but there is no requirement regarding the loan having an interest rate of over 5%.

Question 33

For how long does registration on the Federal Trade Commission's "Do Not Call" registry last?

A) Two years
B) Three years
C) Four years
D) Five years
E) Thirty-six months

Question 34

Which of the following are federal laws regulating the credit industry?

A) The Truth-in-Lending Act
B) The Fair Credit Reporting Act
C) The Fair Debt Collection Practices Act
D) The Truth-in-Lending Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act
E) The Truth-in-Lending Act and the Fair Credit Reporting Act, but not the Fair Debt Collection Practices Act

Question 35

State consumer protection laws prohibiting used-car fraud are known as _____________ laws.

A) Orange
B) Prune
C) Lemon
D) Onion
E) Garlic

Question 36

The Truth-in-Lending Act includes which of the following categories of loans?

A) Open-end credit
B) Closed-end credit
C) Credit card applications and solicitations
D) Open-end credit, closed-end credit, and credit card applications and solicitations
E) Open-end credit and closed-end credit, but not credit card applications and solicitations

Question 37

In order to come within the scope of the Truth-in-Lending Act, a loan must be in the amount of _____________ unless it is secured by a mortgage on real estate.

A) $50,000 or more
B) $50,000 or less
C) $30,000 or more
D) $40,000 or less
E) $25,000 or less

Question 38

To which of the following loans does the Truth-in Lending Act apply?

A) Loans to a natural person
B) Loans to a natural person and to a limited partnerships
C) Loans to a natural person, loans to a limited partnership, and loans to a general partnership
D) Loans to a natural person, loans to a limited partnership, loans to a general partnership, and loans to a corporation
E) All loans

Question 39

Which of the following must credit card applications include under the Truth-in-Lending-Act?

A) The APR.
B) Annual fees.
C) The grace period for paying without a finance charge.
D) The APR, annual fees, and the grace period for paying without a finance charge.
E) The APR and the annual fees, but not the grace period for paying without a finance charge.

Question 40

Which of the following is true regarding federal regulation of used-car sales?

A) Odometer fraud is prohibited.
B) There are requirements regarding notification that a car is being sold "as is."
C) The dealer may attach a label providing that no further inspection is needed if the car has already gone through a thorough inspection by the dealer.
D) Odometer fraud is prohibited; there are requirements regarding notification that a car is being sold "as is;" and the dealer may attach a label providing that no further inspection is needed if the car has already gone through a thorough inspection by the dealer.
E) Odometer fraud is prohibited and there are requirements regarding notification that a car is being sold "as is," but the dealer is not allowed to indicate that no further inspection is needed.

Question 41

Reference - The Burial Emporium. Fred operates a funeral home called Fred's Burial Emporium. Fred likes to keep things simple. He has one flat price with no itemization and requires that customers purchase a complete package from him if they want any services whatsoever. Fred also goes door-to-door selling funeral packages. He tries to visit neighborhoods in which there has been a recent death because residents in the neighborhood will have final arrangements on their minds. He believes and informs customers that once customers sign a contract for burial services, there is no backing out. Fred also obtains a good deal of business from phone solicitation. He enjoys calling late at night, between 10 p.m. and 11 p.m., when people are tired, but before they go to bed. He believes that if people do not feel well, they are more likely to consider funeral arrangements. After some pesky consumer complaints, the Federal Trade Commission and other federal agencies investigate Fred. He hires a good lawyer with his profits in an attempt to stay out of trouble. Which of the following is true regarding Fred's practice of doing telephone solicitations late at night after people are tired?

A) Under federal law there is no problem with his practice because any consumer who does not want to talk to him can simply hang up.
B) According to a rule of the Federal Trade Commission, if a telemarketer calls a residence after 9 p.m., the telemarketer is engaging in abusive behavior; therefore, Fred is in violation.
C) According to a rule of the Federal Trade Commission, if a telemarketer calls a residence after 8 p.m., the telemarketer is engaging in abusive behavior; therefore, Fred is not in violation.
D) According to a rule of the Federal Trade Commission that is specific to funeral home directors, direct phone solicitation may not be made; therefore, Fred is in violation.
E) According to a rule of the Federal Trade Commission that is specific to funeral home directors, direct phone solicitation may not be made after 7 p.m.; therefore, Fred is in violation.

Question 42

By federal law, major credit reporting agencies are now required to provide consumers with a free copy of their credit report every _____________.

A) 36 months
B) 24 months
C) 12 months
D) 6 months
E) None of these because there is no such requirement.

Question 43

Which of the following is the agency responsible for enforcing the Federal Food, Drug, and Cosmetic Act?

A) The U.S. Food and Drug Administration
B) The Federal Consumer Administration
C) The Federal Consumption Administration
D) The Federal Safety Commission
E) The U.S. Uniform Drug Commission

Question 44

Which of the following was the first federal legislation regulating food and drugs?

A) The Applied Food, Drug, and Cosmetic Act
B) The Pure Food and Drugs Act
C) The Food and Drug Safety Act
D) The Consumer Safety Act
E) The Congressional Safety Act

Question 45

Reference - Miracle Pill. Katie advertised that she had developed a pill for women that would result in weight loss, wrinkle loss, and improved vitality; and for men would result in all those things, plus hair growth. Her television advertisement showed miracle results allegedly obtained by consumers. Katie cautioned, however, that ingestion of the pill for six months was required before results would be evident. The pill was wildly popular. The Federal Trade Commission, however, investigated and determined that Katie had failed to have a reasonable basis for the claims she made in advertisements. Katie claimed that she was merely involved in the use of generalities and clear exaggerations. The Commission disagreed and issued a formal administrative complaint against her. After a hearing, an order was issued by the Federal Trade Commission requiring that Katie stop advertising and selling the pills. After losing all appeals, Katie continued selling the pills until she was fined by the Federal Trade Commission. She has since left the country and cannot be located. Who would have presided over the hearing involving the administrative complaint filed against Katie by the Federal Trade Commission?

A) A state circuit court judge
B) A federal district court judge
C) An administrative law judge
D) A panel of commissioners of the Federal Trade Commission
E) All the commissioners of the Federal Trade Commission

Question 46

Which of the following are prohibited by the Fair Debt Collection Practices Act?

A) Contacting a debtor at work if the debtor's employer objects.
B) Misrepresenting the collection agency as a lawyer or police officer.
C) Contacting a debtor who has notified the collection agency that he or she wants no contact with the agency.
D) Contacting a debtor at work if the debtor's employer objects, misrepresenting the collection agency as a lawyer or police officer, and contacting a debtor who has notified the collection agency that he or she wants no contact with the agency.
E) Contacting a debtor at work if the debtor's employer objects, and misrepresenting the collection agency as a lawyer or police officer are prohibited; but contacting a debtor who has notified the collection agency that he or she wants no contact with the agency is not prohibited.

Question 47

Which of the following conducts investigations into the safety of motor vehicles?

A) The Vehicle Investigation Commission
B) The Vehicle Safety Administration
C) The National Highway Traffic Safety Administration
D) The Motorized Safety Administration
E) The Transportation Safety Commission

Question 48

Reference - Miracle Pill. Katie advertised that she had developed a pill for women that would result in weight loss, wrinkle loss, and improved vitality; and for men would result in all those things, plus hair growth. Her television advertisement showed miracle results allegedly obtained by consumers. Katie cautioned, however, that ingestion of the pill for six months was required before results would be evident. The pill was wildly popular. The Federal Trade Commission, however, investigated and determined that Katie had failed to have a reasonable basis for the claims she made in advertisements. Katie claimed that she was merely involved in the use of generalities and clear exaggerations. The Commission disagreed and issued a formal administrative complaint against her. After a hearing, an order was issued by the Federal Trade Commission requiring that Katie stop advertising and selling the pills. After losing all appeals, Katie continued selling the pills until she was fined by the Federal Trade Commission. She has since left the country and cannot be located. Which of the following is the term for the order issued by the Federal Trade Commission ordering that Katie stop advertising and selling the pills?

A) A stop gap order
B) An approved order
C) An agency acknowledged order
D) An agency requirements order
E) A cease-and-desist order

Question 49

Reference - The Burial Emporium. Fred operates a funeral home called Fred's Burial Emporium. Fred likes to keep things simple. He has one flat price with no itemization and requires that customers purchase a complete package from him if they want any services whatsoever. Fred also goes door-to-door selling funeral packages. He tries to visit neighborhoods in which there has been a recent death because residents in the neighborhood will have final arrangements on their minds. He believes and informs customers that once customers sign a contract for burial services, there is no backing out. Fred also obtains a good deal of business from phone solicitation. He enjoys calling late at night, between 10 p.m. and 11 p.m., when people are tired, but before they go to bed. He believes that if people do not feel well, they are more likely to consider funeral arrangements. After some pesky consumer complaints, the Federal Trade Commission and other federal agencies investigate Fred. He hires a good lawyer with his profits in an attempt to stay out of trouble. Which of the following is true regarding Fred's door-to-door solicitation and his practice of informing customers that there is no backing out of contracts entered into for funeral services?

A) There is no problem with Fred's actions so long as he truly gives specific notice that he will not agree to any cancellations.
B) Fred must give customers at least 24 hours in which to cancel such a contract, but that is only because funeral services are involved.
C) There is no problem with Fred's actions even if he does not give specific notice that he will not agree to any cancellations.
D) Because door-to-door sales are involved, Fred must give consumers 24 hours in which to cancel.
E) Because door-to-door sales re involved, consumers must have three days in which to cancel purchases.

Question 50

Reference - Convertibles. Barry, a new car dealer, advertised that a new brand of convertible called Wind would be available at his dealership for the price of $10,000 each. He had only three Wind vehicles, however; and when those were sold, he tried to convince shoppers to purchase a much more expensive new convertible at a price of $25,000. Kathy, a customer who decided to purchase one of the more expensive vehicles needed financing in order to do so. She had $10,000 to pay on the car and sought a loan from ABC Bank for the remainder. She wanted the loan for a specific amount of time. ABC Bank offered her the loan and she agreed. The only information she received from ABC Bank was confirmation that she borrowed $15,000 at an 8% interest rate. After receiving several complaints, the Federal Trade Commission disapproved of Barry's action in regard to the Wind vehicles. Claiming that his advertisement was misleading, the Commission proceeded to issue a cease-and-desist order prohibiting deceptive advertising involving Wind vehicles and also in regard to any other vehicles Barry offered for sale. Under the Truth-in-Lending Act what type of information should Kathy have received from ABC Bank?

A) The total amount financed; and the number, amount, and due dates of payments.
B) The total amount financed; the number, amount, and due dates of payments; and the bank policy in the event of a delinquency.
C) The total amount financed; the number, amount, and due dates of payments; and the bank's policy regarding selling loans to other financial institutions.
D) The total amount financed; the number, amount, and due dates of payments; the bank policy in the event of a delinquency; and the bank's policy regarding selling loans to other financial institutions.
E) Only the information she received.

Question 51

Reference - Convertibles. Barry, a new car dealer, advertised that a new brand of convertible called Wind would be available at his dealership for the price of $10,000 each. He had only three Wind vehicles, however; and when those were sold, he tried to convince shoppers to purchase a much more expensive new convertible at a price of $25,000. Kathy, a customer who decided to purchase one of the more expensive vehicles needed financing in order to do so. She had $10,000 to pay on the car and sought a loan from ABC Bank for the remainder. She wanted the loan for a specific amount of time. ABC Bank offered her the loan and she agreed. The only information she received from ABC Bank was confirmation that she borrowed $15,000 at an 8% interest rate. After receiving several complaints, the Federal Trade Commission disapproved of Barry's action in regard to the Wind vehicles. Claiming that his advertisement was misleading, the Commission proceeded to issue a cease-and-desist order prohibiting deceptive advertising involving Wind vehicles and also in regard to any other vehicles Barry offered for sale. What kind of objectionable advertising, if any, was Barry engaged in when he offered convertibles for sale for $10,000 but only had three and then tried to convince customers to purchase a much more expensive vehicle?

A) Advertise-and-deny
B) Claim-and-refuse
C) Bait-and-switch
D) Ad trickery
E) He was not engaged in any objectionable advertising so long as he had at least one vehicle in stock at a price of $10,000.

Question 52

Which of the following governs the issuance of credit reports?

A) The Prohibited Report Act
B) The Fair Credit Reporting Act
C) The Unfair Reporting Act
D) The Loan Reporting Act
E) The Credit Protection Act

Question 53

Reference - The Burial Emporium. Fred operates a funeral home called Fred's Burial Emporium. Fred likes to keep things simple. He has one flat price with no itemization and requires that customers purchase a complete package from him if they want any services whatsoever. Fred also goes door-to-door selling funeral packages. He tries to visit neighborhoods in which there has been a recent death because residents in the neighborhood will have final arrangements on their minds. He believes and informs customers that once customers sign a contract for burial services, there is no backing out. Fred also obtains a good deal of business from phone solicitation. He enjoys calling late at night, between 10 p.m. and 11 p.m., when people are tired, but before they go to bed. He believes that if people do not feel well, they are more likely to consider funeral arrangements. After some pesky consumer complaints, the Federal Trade Commission and other federal agencies investigate Fred. He hires a good lawyer with his profits in an attempt to stay out of trouble. Which of the following is true regarding Fred's practice of offering one flat price for funeral services with no itemization?

A) Federal law does not prohibit that practice.
B) That practice is prohibited under federal law in funeral home situations.
C) That practice is prohibited under federal law in funeral home situations only if there is no other funeral home within 20 miles.
D) That practice is prohibited under federal law in funeral home situations only if there is no other funeral home within 10 miles.
E) That practice is prohibited by federal law unless consumers receive a 10% discount as compared to the average price of funeral services in his state.

Question 54

Reference - Miracle Pill. Katie advertised that she had developed a pill for women that would result in weight loss, wrinkle loss, and improved vitality; and for men would result in all those things, plus hair growth. Her television advertisement showed miracle results allegedly obtained by consumers. Katie cautioned, however, that ingestion of the pill for six months was required before results would be evident. The pill was wildly popular. The Federal Trade Commission, however, investigated and determined that Katie had failed to have a reasonable basis for the claims she made in advertisements. Katie claimed that she was merely involved in the use of generalities and clear exaggerations. The Commission disagreed and issued a formal administrative complaint against her. After a hearing, an order was issued by the Federal Trade Commission requiring that Katie stop advertising and selling the pills. After losing all appeals, Katie continued selling the pills until she was fined by the Federal Trade Commission. She has since left the country and cannot be located. Which of the following are generalities and clear exaggerations that are allowable by the Federal Trade Commission?

A) Huffing
B) Puffing
C) Crowing
D) Swelling
E) None of these because the Federal Trade Commission does not allow generalities and clear exaggerations

Question 55

Which of the following is false regarding the Consumer Product Safety Act?

A) It enforces mandatory standards regarding product safety.
B) It has no authority to require a recall of products.
C) It conducts research regarding potentially hazardous products.
D) It educates consumers about product safety.
E) It can ban consumer products from the market.

Question 56

Reference - Convertibles. Barry, a new car dealer, advertised that a new brand of convertible called Wind would be available at his dealership for the price of $10,000 each. He had only three Wind vehicles, however; and when those were sold, he tried to convince shoppers to purchase a much more expensive new convertible at a price of $25,000. Kathy, a customer who decided to purchase one of the more expensive vehicles needed financing in order to do so. She had $10,000 to pay on the car and sought a loan from ABC Bank for the remainder. She wanted the loan for a specific amount of time. ABC Bank offered her the loan and she agreed. The only information she received from ABC Bank was confirmation that she borrowed $15,000 at an 8% interest rate. After receiving several complaints, the Federal Trade Commission disapproved of Barry's action in regard to the Wind vehicles. Claiming that his advertisement was misleading, the Commission proceeded to issue a cease-and-desist order prohibiting deceptive advertising involving Wind vehicles and also in regard to any other vehicles Barry offered for sale. Which of the following terms references the cease-and-desist order entered by the Federal Trade Commission involving not only Barry's sales of Wind, but also his sales of all other vehicles?

A) A multiple cease-and-desist order
B) A multiple-product order
C) A combined order
D) A superlative order
E) An exceptional order

Question 57

Reference - Convertibles. Barry, a new car dealer, advertised that a new brand of convertible called Wind would be available at his dealership for the price of $10,000 each. He had only three Wind vehicles, however; and when those were sold, he tried to convince shoppers to purchase a much more expensive new convertible at a price of $25,000. Kathy, a customer who decided to purchase one of the more expensive vehicles needed financing in order to do so. She had $10,000 to pay on the car and sought a loan from ABC Bank for the remainder. She wanted the loan for a specific amount of time. ABC Bank offered her the loan and she agreed. The only information she received from ABC Bank was confirmation that she borrowed $15,000 at an 8% interest rate. After receiving several complaints, the Federal Trade Commission disapproved of Barry's action in regard to the Wind vehicles. Claiming that his advertisement was misleading, the Commission proceeded to issue a cease-and-desist order prohibiting deceptive advertising involving Wind vehicles and also in regard to any other vehicles Barry offered for sale. What type of loan was Kathy seeking from ABC Bank?

A) An open-end credit line
B) A closed-end credit line
C) An approved line
D) A line of credit
E) A direct line

Question 58

Reference - Miracle Pill. Katie advertised that she had developed a pill for women that would result in weight loss, wrinkle loss, and improved vitality; and for men would result in all those things, plus hair growth. Her television advertisement showed miracle results allegedly obtained by consumers. Katie cautioned, however, that ingestion of the pill for six months was required before results would be evident. The pill was wildly popular. The Federal Trade Commission, however, investigated and determined that Katie had failed to have a reasonable basis for the claims she made in advertisements. Katie claimed that she was merely involved in the use of generalities and clear exaggerations. The Commission disagreed and issued a formal administrative complaint against her. After a hearing, an order was issued by the Federal Trade Commission requiring that Katie stop advertising and selling the pills. After losing all appeals, Katie continued selling the pills until she was fined by the Federal Trade Commission. She has since left the country and cannot be located. If a company violates a cease-and-desist order issued by the Federal Trade Commission and upheld by the courts, which of the following is the fine that the Federal Trade Commission may impose?

A) Up to $3,000 per violation
B) Up to $5,000 per violation
C) Up to $10,000 per violation
D) Up to $50,000 per violation
E) Up to $100,000 per violation

Question 59

General credit information is considered obsolete after ____________ years.

A) 3
B) 4
C) 5
D) 7
E) 8

Question 60

The Equal Credit Opportunity Act makes it illegal for creditors to deny credit to individuals on the basis of _____________.

A) Race, religion, national origin, color, sex, marital status, or age
B) Race, national origin, color, sex, marital status, or age
C) Race, religion, national origin, color, sex, or age
D) Race, religion, national origin, color, or sex
E) Race, religion, color, sex, marital status, or age

Question 61

Reference - The Burial Emporium. Fred operates a funeral home called Fred's Burial Emporium. Fred likes to keep things simple. He has one flat price with no itemization and requires that customers purchase a complete package from him if they want any services whatsoever. Fred also goes door-to-door selling funeral packages. He tries to visit neighborhoods in which there has been a recent death because residents in the neighborhood will have final arrangements on their minds. He believes and informs customers that once customers sign a contract for burial services, there is no backing out. Fred also obtains a good deal of business from phone solicitation. He enjoys calling late at night, between 10 p.m. and 11 p.m., when people are tired, but before they go to bed. He believes that if people do not feel well, they are more likely to consider funeral arrangements. After some pesky consumer complaints, the Federal Trade Commission and other federal agencies investigate Fred. He hires a good lawyer with his profits in an attempt to stay out of trouble. Which of the following is true regarding Fred's practice of requiring a complete package purchase from him if the consumer desires any funeral services?

A) There is no problem with that practice under federal law.
B) There is no problem with that practice under federal law so long as Fred informs customers of that prior to entering into any sales talk and negotiation.
C) That practice is prohibited by federal law.
D) That practice is prohibited by federal law unless Fred gives a 10% discount as compared to the average price of funeral services in his state.
E) That practice is prohibited by federal law unless Fred gives a 20% discount as compared to the average price of funeral services in his state.

Question 62

Set forth the rights of appeal a company has if issued a cease-and-desist order by the Federal Trade Commission.

Question 63

What three key guidelines regarding mail-order sales were established by the Mail or Telephone Order Merchandise Rule of 1993 which amended the 1975 Mail-Order Rule?

Question 64

How can the Federal Trade Commission protect consumers if most companies within one industry are using the same unfair or deceptive practices?

Question 65

Mona markets a bell that she claims will automatically quiet a crying baby. Mona advertises on television that the bell has a certain tone that babies love and shows a baby suddenly stop crying when the bell is rung. She charges $50 for each bell for which she incurs $1 in manufacturing charges. The bell was very popular for a few months, but she has started to get complaints; and the Federal Trade Commission has investigated her advertisement regarding the bell. Mona claims that her advertisement is not deceptive. The Federal Trade Commission, however, claims that her advertisement satisfies the three elements necessary for a deceptive claim. What are those three elements?

Question 66

What is required by the Telemarketing Sales Rule of 1995?

Question 67

Sam, who is elderly, is very annoyed because he continues to receive magazines and books in the mail from a publisher. He had not requested the publications and has no idea why they started coming. The letters that come with the publications instruct him to return any magazines or books that he does not want. Understandably, postage is becoming expensive for Sam. What law protects him and what option does he have, if any?