Deck 22: Consumer Protection

Question 1

Federal laws often provide more sweeping and significant protections for the consumer than state laws. 

Answer 1

False

Question 2

A sanction known as bait-and-switch advertising requires a company to advertise the products of its competitor to counter its own false claims. 

Answer 2

False

Question 3

Counteradvertising occurs when a salesperson lures a consumer into a store by advertising a low-priced item in order to switch the consumer to a more expensive item. 

Answer 3

False

Question 4

Puffery constitutes deceptive advertising. 

Question 5

Advertising that contains an endorsement by a celebrity will not be deemed deceptive. 

Question 6

Package labels must use words that the ordinary consumer understands. 

Question 7

Deceptive advertising occurs if a reasonable consumer would be misled by the advertising claim. 

Question 8

A consumer who receives unsolicited merchandise sent by U.S.mail can keep it without obligation to the sender. 

Question 9

The Truth-in-Lending Act applies to persons who,in the ordinary course of their business,lend money,sell on credit,or arrange for the extension of credit. 

Question 10

Food products are required to bear labels detailing the nutritional content. 

Question 11

The Federal Trade Commission is charged with determining what constitutes a deceptive trade practice. 

Question 12

State consumer protection laws are directed at deceptive trade practices. 

Question 13

Ads can be unfair but not deceptive. 

Question 14

An information label must be attached to every new car to include the fuel economy estimate for the vehicle. 

Question 15

Deceptive advertising does not occur in the online environment. 

Question 16

Merchants must ship orders within the time promised in their ads. 

Question 17

Vague generalities and obvious exaggerations are permissible in advertising. 

Question 18

Federal law governs the use of terms such as fresh on food labels. 

Question 19

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

Question 20

Credit can be denied solely on the basis of marital status. 

Question 21

Herman's Hammer Company and Melissa's Mallets,Inc.both make hammers.Both companies only use steel produced in the United States to make their hammers.Herman's Hammer Company displays an ad in the local hardware store that says,"Buy from Herman's - we only use American steel,while competitors like Melissa's Mallets use inferior foreign steel!" The statement in the ad is 

A) ​an obvious exaggeration. 
B) ​puffery. 
C) ​a false claim about a competitor's product. 
D) ​a half-truth.

Question 22

Drugs can be test-marketed to the public before they are ensured to be safe and effective. 

Question 23

A credit collection agency may contact a debtor at any time. 

Question 24

The Food and Drug Administration must ensure the safety of new drugs. 

Question 25

The Federal Reserve Board of Governors has issued a regulation that governs credit provisions associated with sales contracts-Regulation Z. 

Question 26

Soundbites Corporation makes and markets cellphones.Soundbites's ad states that on its phones voices and text come through as "clear as the sky on a cloudless day." The Federal Trade Com-mission would consider this claim 

A) ​false and misleading. 
B) ​impermissibly vague and general. 
C) ​a deceptive half-truth. 
D) ​none of the choices.

Question 27

Wild Things,Inc.(WTI),in its ads,makes claims about its products that are obvious exaggerations and claims that are false but appear to be true.WTI 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 28

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

Question 29

The main purpose of the Fair Debt Collection Practices Act is to ensure that creditors are always paid by debtors. 

Question 30

Manufacturers are required to report on any products intended for sale if the products have proved to be hazardous. 

Question 31

Credit can be denied solely on the basis of race. 

Question 32

Merchants must issue a refund within a specified period of time when a consumer cancels an order. 

Question 33

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 34

A debt-collection agency is someone who regularly attempts to collect debts on behalf of someone else,usually for a percentage of the amount owed. 

Question 35

A credit-card company must send monthly bills to cardholders twenty-one days before the due date. 

Question 36

National Home Products,Inc.,in its advertisements,makes false claims about its own products and about the products of its competitors.National may be subject to sanctions for the false claims about 

A) ​its products only. 
B) ​its competitors' products only. 
C) ​its products and its competitors' products. 
D) ​none of the choices.

Question 37

Any time a consumer is denied credit or insurance on the basis of his or her credit report,the consumer must be notified of that fact. 

Question 38

A credit-cardholder is liable for all unauthorized charges made before the creditor is notified that the card has been lost.

Question 39

Creditors attempting to collect debts are generally considered to be debt-collection agencies. 

Question 40

Slow-Brew Coffee Company sells coffee and related beverages.The company's ad contends that ambitious businesspersons "Drink Us & Rise Up in the World!' " The Federal Trade Com-mission would consider this ad to be 

A) ​false and misleading. 
B) impermissibly vague and general.​ 
C) ​a deceptive half-truth. 
D) ​none of the choices.

Question 41

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

A) ​no federal law. 
B) ​the Consumer Leasing Act. 
C) ​the Consumer Product Safety Act. 
D) ​the Truth-in-Lending Act.

Question 42

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) ​intelligence. 
B) ​education. 
C) ​income. 
D) ​race.

Question 43

Kirsten receives unsolicited merchandise in the mail.Kirsten 

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 44

Cecilia borrows $20,000 from Debit &Credit Union to repair her home and to buy a car.She buys a laptop from eStuf Store in a transaction financed by the seller.If these parties are subject to the Truth-in-Lending Act,Regulation Z applies 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 45

SmartPhone Company's ad states that its product is "The Best that Money Can Buy." Because of this ad,the Federal Trade Com-mission is most likely to issue​ 

A) ​a cease-and-desist order. 
B) ​a counteradvertising order. 
C) ​a restitution order. 
D) ​none of the choices.

Question 46

Bagels n' Pastries,Inc.,makes and sells a variety of bread products.Bagels n' Pastries's product packages must include 

A) ​the company owner's identity. 
B) ​the contents' net quantity. 
C) ​the restaurants and stores in which the product is sold. 
D) ​the type of consumer most likely interested in the product.

Question 47

Marshall's Mattress Company advertises a special sale on mattresses on its website.The mattresses are normally sold for $1,000,but are advertised on the website for $499.The sale price does not,however,include shipping costs.Marshall's charges $250 for shipping any mattress.To avoid any claims of deceptive advertising,Marshall's should 

A) ​be sure that it has clear and conspicuous disclosure of the shipping costs. 
B) ​list the shipping cost in small print at the bottom of the Web page. 
C) ​list the shipping cost on the last Web page. 
D) ​avoid listing the shipping cost anywhere on the website.

Question 48

Elise and many other consumers complain to the Federal Trade Commission (FTC)that a Faux Diamonds 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) ​order restitution.

Question 49

Creditworthy Loan Company extends credit in the ordinary course of its business.Under the Truth-in-Lending Act,Creditworthy must inform potential borrowers of 

A) ​credit terms offered by other lenders. 
B) ​comparative prices for goods to be bought with the borrowed funds. 
C) ​Creditworthy's credit terms. 
D) ​the borrowers' credit scores.

Question 50

Hearth & Home Furniture store advertises bedroom suites at a "Special Low Price of $599." When Ilene tries to buy one of the suites,Jill,the salesperson,tells her that they are all sold and no more are obtainable.Jill adds that Hearth & Home has other bedroom suites available for as low as $2,599.This is 

A) ​a cease-and-desist order. 
B) ​bait-and-switch advertising. 
C) ​counteradvertising. 
D) ​puffery.

Question 51

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 laptop for $1,800.Kirk is 

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

Question 52

In its ads,Crunchy Inc.makes various claims about its snack products.Crunchy's advertising claims would most likely be deemed deceptive if the claims 

A) ​mislead a reasonable consumer. 
B) ​contain vague generalities. 
C) ​consist of what is known as puffery. 
D) ​include obvious exaggerations.

Question 53

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

A) ​no federal law. 
B) ​the Consumer Leasing Act. 
C) ​the Consumer Product Safety Act. 
D) ​the Truth-in-Lending Act.

Question 54

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. 
B) ​a counteradvertising order. 
C) ​a restitution order. 
D) ​none of the choices.

Question 55

Under federal law,the calorie content of the food on a menu must be posted by Organic Mix,LLC,if Organic Mix is 

A) ​a restaurant chain with twenty or more locations. 
B) ​a food distributor with twenty or more customers. 
C) ​a food processor with twenty or more products. 
D) ​a food producer with twenty or more acres.

Question 56

Gear Motor Company makes cars.Federal law requires Gear to attach an information label that includes the Environmental Protection Agency's fuel economy estimate for a vehicle to 

A) every new car.​ 
B) ​no car-compliance with the law is voluntary. 
C) ​select old and new cars. 
D) ​whichever vehicles Gear chooses.

Question 57

QuikPay Inc.extends credit to consumers.QuikPay is subject to the Equal Credit Opportunity Act,which prohibits credit dis-crimination based on 

A) ​intelligence. 
B) ​education. 
C) ​income. 
D) ​race.

Question 58

Grover signs an installment contract with Home Appliance Store to finance the purchase of new kitchen appliances-stove,refrigerator,dishwasher,microwave,and toasteroven-for $3,999.This transaction is subject to 

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

Question 59

Spicy Salsa,Inc.,complains to the Federal Trade Commission (FTC)about an ad broadcast by Tangy Taco Sauce Company,Spicy Salsa'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 Spicy Salsa to broadcast similarly deceptive counteradvertising.

Question 60

Sweet Treats,Inc.,wants to market a new snack food.On the product's label,standard nutrition facts are 

A) ​prohibited. 
B) ​required. 
C) ​strictly voluntary. 
D) ​warranted by the nature of the food.

Question 61

Dina takes out a student loan from Earnest Bank.When she fails to make the scheduled payments for six months,Earnest advises her of further action that it will take.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 62

Rely Battery Corporation makes batteries for motor vehicles.The Federal Trade Commission (FTC)learns that Chuck's Automotive Stores,a retail company that sells Rely's batteries,engages in deceptive advertising practices.What actions can the FTC take against Chuck's?

Question 63

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 64

Phil has a credit-card from Credible Cards,Inc.Credible Cards decides to make changes to Phil's credit-card terms.Credible Cards 

A) ​must give Phil at least thirty days' notice before changing the terms. 
B) ​must give Phil at least forty-five days' notice before changing the terms. 
C) ​need not give Phil any notice before changing the terms. 
D) ​is not allowed to change the terms.

Question 65

Corner Market sells groceries.Delta 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 Delta Food & Drug Store. 
B) ​Delta Food & Drug Store only. 
C) ​the Federal Trade Commission. 
D) ​the Food and Drug Administration.

Question 66

Steel Tool Company makes and sells tools.One of the tools is believed to be hazardous.Steel may be required 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 67

Mouth-Waterin' Treats Company wants to sell its candy in a normal-sized package labeled "Gigantic Size." NuFabrics,Inc.,wants to advertise its sweaters as having "That Wool Feel," but does not want to specify on labels that the sweaters are 100 percent polyester.Can these firms market their products as they would like? If not,why not?

Question 68

Wellness Insurance Company offers health and medical insurance to consumers.Under current federal health-care laws,Wellness is prohibited from 

A) ​denying coverage for preexisting conditions. 
B) ​enabling more children to obtain health-insurance coverage. 
C) ​allowing adults under age twenty-six to remain on their parents' health insurance. 
D) ​ending lifetime and most annual limits on care.

Question 69

Fun-E Products,Inc.,makes and sells toys.The government agency that has the authority to remove a potentially 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 70

Logan's application to Metro Bank for a credit card is denied.Logan can obtain information on his 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 71

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 72

The credit department of Mega-Mart often calls Nora at work about an overdue bill.Nora's employer objects.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.