Deck 44: Consumer Law

Question 1

An advertisement that contains an endorsement by a celebrity may be deemed deceptive if the celebrity does not actually use the product.

Answer 1

True

Question 2

The Truth-in-Lending Act protects debtors who are natural persons, as well as those who are artificial persons, such as corporations.

Answer 2

False

Question 3

Counteradvertising is advertising that counters a competitor's claims.

Answer 3

False

Question 4

Federal law prohibits vague generalities and obvious exaggerations in advertising.

Question 5

Every food product label must include a warning of the possible ef?fects of the product on consumer health.

Question 6

A person who receives unsolicited merchandise and keeps it without notifying the sender commits mail fraud.

Question 7

Some states have amended their consumer protection statutes to cover Internet transactions.

Question 8

The test for whether an ad is deceptive is whether a reason?able con?sumer would be misled.

Question 9

Puffery is prohibited.

Question 10

The Federal Trade Commission is charged with pre?venting unfair and deceptive trade practices.

Question 11

All consumer protection laws are federal.

Question 12

When a consumer cancels an order, a mail-order merchant must issue a refund within a specific period of time.

Question 13

A company charged with deceptive advertising must go through a hear?ing to resolve the complaint.

Question 14

Product labels do not need to be accurate if they use easily un?derstood words.

Question 15

State and federal laws permit a buyer of goods sold door to door to cancel the contract within a specified period of time.

Question 16

An ad that contains a "half truth"-information that is true but incom?plete-is not deceptive.

Question 17

Package labels must use words that the ordinary consumer understands.

Question 18

State laws often provide more significant protections for the consumer than do fed?eral laws.

Question 19

Advertising that appears to be based on factual evidence, even if it is not, will not be deemed deceptive.

Question 20

It is generally illegal to send an ad via fax without the recipi?ent's permission.

Question 21

A collection agency cannot contact a debtor at the debtor's place of employment.

Question 22

The Equal Credit Opportunity Act prohibits the denial of credit on the ba?sis of an individual's disability.

Question 23

There are no limits on the amount that may be garnished from a debtor's after-tax earnings.

Question 24

A credit-reporting agency may issue a credit report to anyone who asks.

Question 25

A loan between two consumers is subject to the Truth-in-Lending Act.

Question 26

In a transaction subject to the Truth-in-Lending Act, all of the terms of a credit instrument must be clearly and conspicuously disclosed.

Question 27

A credit agency may not issue a credit report to any creditor without first obtaining the borrower's permission.

Question 28

"Regulation Z" is a generic term for any consumer protection law.

Question 29

An individual is not liable for any amount of unauthorized charges on his or her credit card.

Question 30

A sale between two consumers is not subject to the Truth-in-Lending Act.

Question 31

Drugs must be shown to be effective and safe before they can be marketed.

Question 32

The Fair Debt Collection Practices Act applies to anyone who tries to col?lect a debt.

Question 33

A consumer may not be denied credit on the basis of a credit report.

Question 34

The Consumer Product Safety Commission prohibits manufacturers from mar?keting products that are not marked with its "seal of approval."

Question 35

If a debt is unpaid for more than thirty days, a creditor can use any means to collect.

Question 36

A product distributor must notify the Consumer Product Safety Commission if a product defect creates a substantial risk to the public.

Question 37

A consumer who believes that he or she has been or may be victimized by identity theft may place an alert on his or her credit file.

Question 38

The Consumer Product Safety Commission can ban any product that it believes poses an "unreasonable risk" to consumers.

Question 39

On request, a consume may obtain the source of any information being given out by a credit agency.

Question 40

A credit-reporting agency must stop reporting fraudulent account information once a consumer establishes that identity theft has occurred.

Question 41

Frosty's Appliance Store advertises freezers at a "Special Low Price of $299." When Garth tries to buy one of the freezers, Huey, the salesperson, tells him that they are all sold and no more are obtainable. Huey adds that Frosty's has other freezers for $2,299. This is

A) a legitimate sales technique.
B) bait-and-switch advertising.
C) counteradvertising.
D) puffery.

Question 42

Miracle Products, Inc., engages in de?ceptive advertising when it markets its product Weight-Off as able to help consumers lose weight in their sleep. Miracle is ordered to include in all future adver?tising of Weight-Off the statement, "Weight-Off will not cause anyone to lose weight in their sleep." This is

A) a counteradvertising order.
B) a multiple product order.
C) bait-and-switch advertising.
D) excessive abuse of authority.

Question 43

Luscious Treats, Inc., wants to market a new snack food. On the prod?uct's la?bel, standard nutrition facts are

A) mandated by the U.S. Chamber of Commerce.
B) required by the Nutrition Labeling and Education Act.
C) strictly voluntary.
D) warranted by the nature of the food.

Question 44

Cleaners & Solvents, Inc. (CSI), engages in de?ceptive advertising when it markets its product Dirt Remover as able to kill germs over long periods of time. In an action against CSI regarding Dirt Remover, the firm is ordered to stop its false advertis?ing of Dirt Remover and other products. This is

A) a counteradvertising order.
B) a multiple product order.
C) bait-and-switch advertising.
D) excessive abuse of authority.

Question 45

Like other manufacturers and sellers, Peoples Products Corporation labels its goods. Federal labeling and packaging rules are enforced by the Federal Trade Commission and

A) the U.S. Department of Commerce.
B) the U.S. Department of Health and Human Services.
C) the U.S. Department of Justice.
D) the U.S. Department of the Treasury.

Question 46

Orange Company makes computers. The company's ad states that "if you aren't eatin' an Orange, you aren't gettin' any 'C." " The Federal Trade Com?mission would consider this ad

A) false and misleading.
B) false only.
C) misleading only.
D) neither false nor misleading.

Question 47

Friendly Loan Company extends credit in the ordinary course of its busi?ness. Under the Truth-in-Lending Act, Friendly must inform potential borrowers of

A) credit terms offered by other lenders and its own credit terms.
B) only credit terms offered by other lenders.
C) only its own credit terms.
D) only the credit terms that will convince borrowers to "close the deal."

Question 48

To generate sales, Yakkity-Yak, Inc., uses phone solicitation. Under federal law and Federal Trade Commission regulations, in soliciting business, Yakkity-Yak's telemarketers must

A) disclose all material facts related to a sale.
B) identify the seller's name (only if asked).
C) refrain from calling consumers who have not requested a call.
D) speak clearly and conspicuously.

Question 49

Precise GPS Company's ad states that its product is "the finest that money can buy." Because of this ad, the Federal Trade Com?mission is most likely to issue

A) a cease-and-desist order only.
B) a cease-and-desist order or a counteradvertising order.
C) a counteradvertising order only.
D) neither a cease-and-desist order nor a counteradvertising order.

Question 50

Consumer Products, Inc. (CPI), in its ads, makes claims about its prod?ucts that are obvious exaggerations and claims that are false but appear to be true. CPI may be subject to sanctions for

A) neither the false claims nor the obvious exaggerations.
B) only the false claims.
C) only the obvious exaggerations.
D) the false claims and the obvious exaggerations.

Question 51

Travel Tours Company faxes ads to Uri and other individual consumers without the recipients' permission. This is subject to

A) a cease-and-desist order by the Federal Trade Commission.
B) no sanctions.
C) possible fines by the Federal Communications Commission.
D) rescission on the order of the Federal Reserve Board.

Question 52

Through unfair trade practices, Super Sales Company induces Trey and other consumers to enter into one-sided deals. This may be subject to sanctions under

A) federal and state law.
B) federal law only.
C) no law, according to the principles of freedom to contract.
D) state law only.

Question 53

GR8 Fashion, Inc., complains to the Federal Trade Commission (FTC) about an ad broadcast by Hott Clothes Company, GR8's competitor. The FTC investigates and concludes that the ad is deceptive. The FTC's next step is to

A) conduct negotiations between the competitors.
B) draft a formal complaint.
C) issue a cease-and-desist order.
D) permit A to broadcast similarly deceptive counteradvertising.

Question 54

Penny Stock Company faxes ads to Quality Personnel Corporation and other businesses without the recipients' permission. This is

A) illegal.
B) legal and smart because such ads are generally cheap.
C) legal but not smart because such ads are generally ineffective.
D) legal but only potentially smart, depending on the response rate.

Question 55

Like other manufacturers and sellers, Useful Products Company packages its products with labels. Under federal law, such labels must be

A) accurate and use easily understood words.
B) bright and feature eye-catching colors.
C) graphically distinctive and well-designed.
D) interesting and revealing to the average consumer.

Question 56

Through careless manufacturing practices, Insta-Market Company makes and sells unsafe products to Jess and other consumers. This may be subject to sanctions under

A) federal and state law.
B) federal law only.
C) no law, according to the principles of freedom to contract.
D) state law only.

Question 57

Brad borrows $20,000 from City Bank to repair his home and to buy a car. Brad buys a stereo from Delta Discount Store in a transaction financed by Delta. If these parties are subject to the Truth-in-Lending Act, Regulation Z ap?plies to

A) the car loan only.
B) the home repair loan only.
C) the retail installment sale only.
D) the car loan, the home repair loan, and the retail installment sale.

Question 58

Vanna and many other consumers complain to the Federal Trade Commission (FTC) that a Whoopie Wonders Company ad is deceptive. The FTC's first step is to

A) draft a formal complaint.
B) investigate.
C) issue a cease-and-desist order.
D) require counteradvertising.

Question 59

Ron signs a contract with Sam, a door-to-door salesperson for Tutors, Inc., to buy a foreign-language course. To cancel the contract, Ron has up to

A) three days.
B) thirty days.
C) sixty days.
D) ninety days.

Question 60

Special Roast Coffee, Inc., processes and sells a variety of coffee products. Special Roast's product packages must include

A) neither the contents' net quantity nor the product's identity.
B) the contents' net quantity and the product's identity.
C) the contents' net quantity only.
D) the product's identity only.

Question 61

In the ordinary course of business, Xtra Charge Company sells goods to Yvon and other consumers on credit under installment sales contracts that typically require at least one year of monthly payments. Xtra does not disclose all of the credit terms to its customers. This is most likely to result in

A) a cease-and-desist order.
B) a fine.
C) no sanctions.
D) rescission of the contracts.

Question 62

Green Grocer Corporation makes and markets a variety of processed food products. The federal agency responsible for enforcing health regula?tions con?cerning food is

A) the Consumer Product Safety Commission.
B) the Federal Reserve Board of Governors.
C) the Federal Trade Commission.
D) the Food and Drug Administration.

Question 63

Consumer Finance Corporation (CFC) extends credit to consumers. CFC is subject to the Equal Credit Opportunity Act, which prohibits credit dis?crimination based on

A) disability.
B) education.
C) income.
D) marital status.

Question 64

Wheels & Deals Corporation is subject to the Truth-in-Lending Act, which concerns

A) the credit-worthiness of certain financial institutions and lenders.
B) the disclosure of credit terms in certain transactions.
C) the limits on certain types of credit that a creditor may grant.
D) the limits on certain types of debt that a consumer can accrue.

Question 65

Furniture Depot sells Gail a bedroom suite on credit. Gail fails to make the scheduled payments for six months. Furniture Depot sends her a let?ter, asking for immediate payment. This is a violation of

A) no federal law.
B) the Fair and Accurate Credit Transactions Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.

Question 66

Quik Collection Agency calls Pat several times a day, and some?times in the middle of the night, about an overdue bill that Regal Sporting Goods turned over to Quik for collection. This is a violation of

A) no federal law.
B) the Fair and Accurate Credit Transactions Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.

Question 67

The credit department of Mega-Mart calls Nora at work about an overdue bill. Nora's employer objects. Mega-Mart continues to call Nora at work. This is a viola?tion of

A) no federal law.
B) the Fair and Accurate Credit Transactions Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.

Question 68

Kirk receives an unsolicited credit card in the mail and tosses it on his desk. Without Kirk's permission, his roommate Leif uses the card to buy a new per?sonal computer for $1,000. Kirk is

A) liable for $1,000.
B) liable for $500.
C) liable for $50.
D) not liable for any amount.

Question 69

Bodie's application to City Bank for a credit card is denied. Bodie can obtain information on her credit history in a credit agency's files under

A) no federal law.
B) the Equal Credit Opportunity Act.
C) the Fair Credit Reporting Act.
D) the Fair Debt Collection Practices Act.

Question 70

Owen signs an installment contract with Pixel Video Store to finance the purchase of a new Quotient-brand plasma HD-TV for $4,999. This transaction is sub?ject to

A) no federal law.
B) the Fair Credit Reporting Act.
C) the Telecommunications Act.
D) the Truth-in-Lending Act.

Question 71

Steel Tool Company makes and sells tools. One of the tools is believed to be haz?ardous. The appropriate government agency may require Steel to

A) export the tool and sell it only abroad.
B) increase the price to cover the cost of any injuries or damage.
C) reduce the price to indicate the hazard to consumers.
D) remove the tool from the market.

Question 72

Kip opens an account at a Lotsa Goodies Store, and buys a digital music player and other items, but makes no payments on the account. To collect the debt, Mako, the manager, contacts Kip's parents. This violates

A) no federal law.
B) the Fair and Accurate Credit Transactions Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.

Question 73

In the ordinary course of business, EZ Funds Corporation offers credit to Fay and other consumers and reports on the loans to credit agencies. To save time and money, EZ generally does not correct or update its reported information. This is most likely to result in

A) a levy of a nominal fine.
B) an assessment of damages.
C) an order of rescission of the loan contracts.
D) no sanctions.

Question 74

Corner Market sells groceries. Delite Food & Drug Store sells groceries and fills prescriptions. The party with the chief responsibility to prevent unsafe food and drugs from being sold is

A) Corner Market and Delite Food & Drug Store.
B) Delite Food & Drug Store only.
C) the Federal Trade Commission.
D) the Food and Drug Administration.

Question 75

Kristen receives unsolicited merchandise in the mail. Kristen

A) may keep the merchandise without any obligation to the sender.
B) must return the merchandise within five days to avoid payment.
C) must return the merchandise within fifteen days to avoid payment.
D) must return the merchandise within thirty days to avoid payment.

Question 76

Eva borrows $10,000 from First National Bank to remodel a room in her home. This transaction is subject to

A) the Consumer Leasing Act.
B) the Magnuson-Moss Warranty Act.
C) the Truth-in-Lending Act.
D) the Uniform Commercial Code.

Question 77

Shep buys a car from his neighbor, Tyrone, for $8,000 and agrees to make monthly payments of $800 until the price is paid. This transaction is sub?ject to

A) the Fair and Accurate Credit Transactions Act.
B) the Fair Credit Reporting Act.
C) the Truth-in-Lending Act.
D) none of the choices.

Question 78

Dita takes out a student loan from Everloan Bank. When she fails to make the scheduled payments for six months, Everloan advises her of further ac?tion that it will take. This violates

A) no federal law.
B) the Fair and Accurate Credit Transactions Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.

Question 79

Fun-E Products, Inc., makes and sells toys. The government agency that has the authority to remove a poten?tially hazardous toy from the market is

A) the Consumer Product Safety Commission.
B) the Federal Reserve Board of Governors.
C) the Federal Trade Commission.
D) the Food and Drug Administration.

Question 80

On behalf of RiteNow Collection Agency, Sid poses as a police officer in an attempt to collect payment from Tylo for a shipment of scuba equipment that she returned to Undersea Company two months earlier. This violates

A) no federal law.
B) the Fair Credit Reporting Act.
C) the Fair Debt Collection Practices Act.
D) the Truth-in-Lending Act.