Deck 20: Consumer Protection

Question 1

Restaurants must post guidelines on the number of calories that an average person requires daily.

Answer 1

True

Question 2

State consumer protection agencies are charged by Congress with the broadly stated goal of preventing unfair and deceptive trade practices.

Answer 2

False

Question 3

Puffery constitutes deceptive advertising.

Answer 3

False

Question 4

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

Question 5

Vague generalities and obvious exaggerations are permissible in advertising.

Question 6

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.

Question 7

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

Question 8

Labels on fresh meats are not required to indicate where the food originated.

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

Deceptive advertising does not occur in the online environment.

Question 15

Labels on fresh vegetables must indicate where the food originated.

Question 16

The Consumer Product Safety Commission is the primary agency that issues regulations on food labeling.

Question 17

A sanction known as counteradvertising requires a company to advertise anew to inform the public about earlier misinformation.

Question 18

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

Question 19

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

Question 20

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

Question 21

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 22

The Fair Debt Collection Practices Act generally applies only to debt-collection agencies that regularly attempt to collect debts on someone else's behalf.

Question 23

Medi-Insurance Company faxes ads to Nancy 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 24

Credit can be denied solely on the basis of race.

Question 25

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

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

Question 26

Insurance companies must spend at least 85 percent of all premium dollars from large employers on benefits and quality improvements.

Question 27

A collection agency must include a validation notice whenever a debtor pays a debt.

Question 28

The Food and Drug Administration does not have the authority to directly recall any food products that it suspects are tainted but must rely on the producers to recall items.

Question 29

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

Question 30

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

Question 31

A collection agency has the right to contact a debtor at the debtor's place of employment whether or not the debtor's employer objects.

Question 32

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

Question 33

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

Question 34

The Consumer Product Safety Commission conducts research on the safety of individual consumer products and maintains a clearinghouse on the risks associated with various products.

Question 35

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 36

Major credit reporting agencies must provide consumers with free copies of their own credit reports every six months.

Question 37

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 Commission 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 38

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

Question 39

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

Question 40

Mouth & Gums, Inc.(CSI), engages in deceptive advertising when it markets its product Oral Rinse as able to kill germs over long periods of time.In an action against Mouth & Gums, the firm is ordered to stop its false advertising of Oral Rinse and other products.This is

A)a counteradvertising order.
B)a multiple product order.
C)a "cooling-off" law.
D)a validation notice.

Question 41

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 42

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 43

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 44

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 45

Cutting Tools Company makes and sells tools.One of Cutting's products is believed to be hazardous.The appropriate government agency may require Cutting 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 46

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 47

Grid Tool Company makes and sells tools.One of the tools is believed to be hazardous.The appropriate government agency may require Grid 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 48

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 49

Nature's Food Market sells groceries.Metro Snacks & Drug Store sells groceries and fills prescriptions.The party with the chief responsibility to prevent unsafe food and drugs from being sold is

A)Nature's Food Market and Metro Snacks & Drug Store.
B)Metro Snacks & Drug Store only.
C)the Federal Trade Commission.
D)the Food and Drug Administration.

Question 50

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 51

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 52

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

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

Question 53

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 advertising of Dirt Remover and other products.This is

A)a counteradvertising order.
B)a multiple product order.
C)a "cooling-off" law.
D)a validation notice.

Question 54

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

A)the Consumer Product Safety Commission.
B)no single federal agency.
C)the Federal Trade Commission.
D)the Food and Drug Administration.

Question 55

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 56

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 multiple product order
B)bait-and-switch advertising.
C)counteradvertising.
D)puffery.

Question 57

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

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

Question 58

Jasmine receives an unsolicited credit card in the mail and tosses it on her desk.Without Jasmine's permission, her roommate Ilene uses the card to buy a new tablet for $500.Jasmine is

A)liable for $500.
B)liable for $250.
C)liable for $50.
D)not liable for any amount.

Question 59

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 60

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 61

Owen buys a restored 1969 Dodge Charger from Prime Restorations, Inc., on credit but makes no payments on the account.Quentin, the owner of Prime Restorations, calls Owen at home on a Monday morning at three
a.m.Quentin represents himself as RiteNow Collection Agency and demands payment "or else." The next day, Quentin sends Owen notice that he has thirty days to request verification of the debt, during which its payment will be suspended, but that if he does not pay the full amount due within five business days, Quentin will arrange for the "destruction of Owen's good credit rating." Which laws has Quentin violated, if any, and in what ways?

Question 62

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 63

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 borrower's credit scores.

Question 64

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 65

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 66

Debt & Loan Collection Agency calls Ethel several times a day, and sometimes in the middle of the night, about an overdue bill that a Furniture4U store turned over to Debt & Loan 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

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 68

Lucy takes out a student loan from Midtown Bank.When she fails to make the scheduled payments for six months, Midtown advises her of further action 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 69

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 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

In the ordinary course of business, Loan2Buy Corporation offers credit to Mai and other consumers and reports on the loans to credit agencies.To save time and money, Loan2Buy 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 72

Robyn wants to go into the business of direct merchandise sales.What are the legal problems that Robyn might encounter in telemarketing? In sell-ing door-to-door? In marketing over the Internet? In soliciting sales through the mail?