Deck 39: Consumer Protection

Question 1

The Magnuson-Moss Warranty Act requires manufacturers to provide a warranty on their products regardless of cost.

Answer 1

False

Question 2

The Federal Trade Commission Act considers the terms "deceptive" and "unfair" to be synonymous when determining what practices should be prohibited.

Answer 2

False

Question 3

In 30-year mortgages, the finance charge typically exceeds the amount of the principal.

Answer 3

True

Question 4

Consumers may keep as a gift any unordered merchandise that they receive in the mail.

Question 5

"Bait-and-switch" tactics are not a violation of FTC rules if the merchant does not have enough stock on hand to meet reasonable demand for the advertised product.

Question 6

The Consumer Financial Protection Bureau (CFPB) was created to represent consumers by filing suit in federal court asking for damages on behalf of the injured consumer.

Question 7

Blogs and social media ads must clearly indicate that they are, in fact, ads by including some equivalent of "ad" or "sponsored."

Question 8

Ron's Furnace Repair advertised it would inspect any homeowner's furnace for free. Janet had Ron's come to inspect her furnace. The servicewoman dismantled the entire furnace then refused to put it back together unless Janet paid her $250. The FTC considers such a practice to be

A) an unfair practice.
B) a deceptive practice.
C) an act that violates public policy.
D) All of these are correct.

Question 9

Under the Fair and Accurate Credit Transactions Act (FACTA),

A) a creditor may not discriminate against a borrower on the basis of race, sex, religion, or age.
B) a debt collector may not harass or abuse debtors.
C) a credit card company must promptly investigate and respond to any consumer complaints about a credit card bill.
D) a consumer has the right to obtain one free credit report every year from each of the three major reporting agencies.

Question 10

Company policy of PushOne, Inc. is to block the company name and telephone number on potential customers' Caller ID systems so they won't know the call is from a telemarketer. This policy violates FTC rules.

Question 11

An employer cannot request a consumer report on a potential employee without that person's permission.

Question 12

Chase received a magazine in the mail that he did not order. He was surprised, but read and enjoyed the magazine. A month later, another copy arrived, along with a bill for $25 to cover the subscription. Which of the following applies to this situation?

A) Chase does not have to pay for the magazine, even if the company continues to send it to him.
B) Chase needs to return the two copies of the magazine he received to show that he is not interested.
C) Chase must notify the magazine whether or not he wants to continue receiving the magazine within 30 days.
D) Chase must pay the bill because the magazine company is entitled to be paid for sending out subscriptions.

Question 13

Brett applies for a $60,000 loan to purchase a tractor for his farm business. This loan is subject to TILA disclosure requirements.

Question 14

The issue in the POM Wonderful, LLC v. FTC case involved

A) the type of evidence necessary to support health claims in advertisements.
B) violation of the Fair Debt Collection Act.
C) the legality of the Consumer Product Safety Act of 1972.
D) violation of the Magnuson-Moss Warranty Act.

Question 15

The Equal Credit Opportunity Act makes it illegal for a lender to discriminate against a potential borrower because of race, national origin, religion, or sex, but it is permissible to treat a borrower differently if he or she is on welfare.

Question 16

The FTC may consider an act unfair if it simply violates public policy.

Question 17

Prime Products, Inc. found out that it was going to take 3 weeks to ship the comforter Margaret ordered instead of the 7 days it had originally promised her. Prime Products must cancel Margaret's order and notify her that it can deliver within 3 weeks if she wants to reorder.

Question 18

For the FTC to consider a practice to be unfair, it must meet a three-part test. Which of the following is NOT one of those tests?

A) The practice causes a substantial consumer injury.
B) The harm of the injury outweighs any countervailing benefit.
C) The consumer had no reasonable way to recoup lost funds from the injury.
D) The consumer could not reasonably avoid the injury.

Question 19

Electronic payments via a telephone, computer, or wire transfers are not regulated by the government.

Question 20

The Truth in Lending Act applies to private individuals who loan money.

Question 21

Which of the following statements expresses the purpose of the Truth-in-Lending Act?

A) to require lenders to charge a "reasonable" rate of interest
B) to regulate interest rates and terms of loans
C) to provide consumers with information necessary to make the best credit decision
D) to help lenders limit state laws

Question 22

Sandy noticed an unauthorized electronic funds withdrawal on her bank statement. In order for her to not be liable for the withdrawal, she must notify her bank within _______ of the date of the bank statement.

A)10 days
B)30 days
C)60 days
D)90 days

Question 23

Under the TILA, a qualified mortgage (QM)

A) limits upfront points and fees to 5 percent.
B) limits all of a borrower's debt to 43 percent of his or her income.
C) allows balloon payments only if the borrower agrees up front.
D) must allow for negative amortization.

Question 24

The maximum rate of interest for credit transactions is established by

A) state law.
B) federal law.
C) the Federal Reserve Board.
D) the FTC.

Question 25

A door-to-door salesperson knocks on Mary's door and convinces her to purchase the Wonder Vacuum for $500. Soon after the salesperson leaves, Mary begins to have second thoughts about the transaction. Which statement about the situation is correct?

A) Mary agreed to purchase the vacuum, so she must honor the agreement.
B) Mary can cancel the transaction at any time before midnight of the third business day thereafter.
C) Mary must pay for the vacuum, but she can get a refund if she returns it to the manufacturer within 30 days.
D) Mary can keep the vacuum without paying when it is delivered, as it was purchased in her home.

Question 26

Mabel is a single 40-year-old who has borrowed money on numerous occasions. Her payment record has been good, except she has been delinquent in paying a few bills. Which of the following is true regarding credit information gathered on Mabel?

A) Since Mabel has been delinquent, she waives her right to see the credit files.
B) If Mabel is rejected for a loan because of the consumer report, the lender must tell her the source of the report.
C) Mabel has a right to have the information regarding her delinquency in paying a few loans stricken from her credit record because her record has generally been good.
D) Mabel's only legal remedy, if there is erroneous information in her credit file, is to report the problem to the FTC for enforcement.

Question 27

Suppose Bill's credit card is stolen and he notifies his credit card company of this fact. Which of the following is true regarding the amount of unauthorized charges made before Bill notified his credit card company?

A) Bill is not responsible for any of the unauthorized charges.
B) Bill is responsible for the first $50 of unauthorized charges.
C) Bill is responsible for the first $100 of unauthorized charges.
D) Bill is responsible for half of the unauthorized charges.

Question 28

Under the Fair Debt Collection Practices Act, a collection company is legally permitted to

A) call the debtor at any time of the day.
B) call acquaintances of the debtor to tell them that the consumer is in debt.
C) call the debtor even if the debtor has requested in writing that he or she wishes no further contact.
D) visit the debtor at work if the consumer's employer permits such contact.

Question 29

With regard to mortgages, the Consumer Finance Protection Bureau (CFPB) requires mortgage servicers

A) to contact borrowers who are 36 days late in making a payment.
B) to wait 180 days after nonpayment before beginning foreclosure.
C) to credit payments within 3 days after they are received.
D) to extend delinquent borrowers additional time to repay the loan.

Question 30

Under FTC rules, when a customer legally cancels a door-to-door sales contract, the seller must return the buyer's money within

A) 3 days.
B) 5 days.
C) 10 days.
D) a "reasonable time" after the sale was made.

Question 31

MoneyMaker Toy Company violated the safety standards set forth by the Consumer Product Safety Commission when it produced a toy gun that caused injury to hundreds of children. Because of MoneyMaker's actions

A) the CPSC can impose civil penalties on the company.
B) the CPSC can impose criminal penalties on the company.
C) users can sue for damages, including attorney's fees, if MoneyMaker knew it was violating a consumer product safety rule when it produced the guns.
D) All of these are correct.

Question 32

John loans George money, and they sign a written agreement whereby George will repay John in monthly installments. Is this loan subject to the Truth in Lending Act?

A) Yes, if the loan is for more than $1,000.
B) Yes, if John and George live in different states.
C) No, if John is not in the business of offering credit.
D) No, if John and George are related.

Question 33

The Fair Debt Collection Practices Act prohibits which of the following practices by a debt collector?
A) falsely representing himself as a lawyer

A)m.
B) telephoning the debtor at 8:00
C) visiting a debtor at work if the employer permits personal visits
D) using neighbors to locate the debtor

Question 34

The Fun Tyme Toy Company discovers that one of its products can easily break, exposing children to potential injury from the sharp parts. Under the Consumer Product Safety Act of 1972, how long does Fun Tyme have to report this defect to the Consumer Product Safety Commission?

A) 24 hours
B) 3 days
C) 7 days
D) 30 days

Question 35

"Bait-and-switch" is

A) advertising a product for sale and then giving the customer a rain check.
B) placing the store brand and the national brand side-by-side in a store to confuse customers.
C) selling the store brand at a lower price than the national brand.
D) advertising certain goods and then pressuring the customer to buy different, more expensive goods.

Question 36

Which of the following is a provision of the CARD Act?

A) Lenders cannot bribe an appraiser to misstate a home's value.
B) Manufacturers must report all potentially hazardous product defects within 24 hours of discovery.
C) Credit card bills must be mailed at least 21 days ahead of their due dates.
D) All of these are correct.

Question 37

In 1969, the federal government estimated that consumer products caused 30,000 deaths, 110,000 disabling injuries, and 20 million trips to the doctor. The product category causing the majority of harm was

A) automobiles.
B) children's toys.
C) power tools.
D) food products.

Question 38

Under the Truth in Lending Act, a lender must disclose all of the following EXCEPT

A) the average percentage rate charged by competitors.
B) the amount financed.
C) the annual percentage rate (APR).
D) the finance charge.

Question 39

What are the three tests or elements used by the FTC to determine whether a particular act is an unfair trade practice?

Question 40

Consumers have a right to

A) exclude as obsolete information about a bankruptcy discharge 7 years previously.
B) know the name of anyone to whom credit information has been supplied by a consumer reporting agency within the last 3 years.
C) have their own version of a disputed credit situation included in their credit file.
D) have investigative reports become obsolete after 1 year.

Question 41

Commonground Collections has been hired to collect past-due medical bills for Lakeview Physicians. List some activities that Commonground may not do pursuant to the FDCPA.

Question 42

Brooke uses her credit card to purchase a lawn mower at the local "big box" hardware store, but when she tries to use the mower for the first time, she finds it is not self-propelled as advertised. Does she have any recourse?

Question 43

Richard received his credit card bill and noticed an error. He wrote to the company the next week, pointing out the error in his bill. Under the law, what is the credit card's obligation once it receives Richard's letter?

Question 44

The Trimbles apply to Community Bank for an installment loan of $20,000 to remodel their bathroom. Discuss the disclosures Community Bank is required to make.

Question 45

What must a seller disclose under the Magnuson-Moss Warranty Act?