Deck 22: Consumer Protection

Question 1

Obvious exaggerations in advertising are prohibited by federal statutes.

Answer 1

False

Question 2

Credit protection is an area of consumer law that is NOT regulated by federal statutes.

Answer 2

False

Question 3

The Federal Trade Commission is charged with de?termining what consti?tutes a deceptive trade practice.

Answer 3

True

Question 4

Those who lease or arrange to lease consumer goods in the ordinary course of their business are subject to the Truth-in-Lending Act.

Question 5

In 2003,Congress passed the CAN-SPAM Act to deal with the many problems associated with "junk e-mail" or spam.

Question 6

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 7

The FTC does not monitor online advertising.

Question 8

Under the Telephone Consumer Protection Act of 1991,it is illegal to use a prerecorded voice in phone solicitations.

Question 9

An ad that is literally true cannot be deceptive.

Question 10

Labeling and packaging is an area of consumer law regulated by federal statutes.

Question 11

The test for whether an advertisement is deceptive is whether a reason?able consumer would be deceived.

Question 12

Bait-and-switch advertising occurs when a customer is lured into a store by an ad for a low price item,which is then unavailable to the customer,who is then encouraged to purchase a more expensive item.

Question 13

A person who receives unsolicited merchandise and keeps it without notifying the sender does NOT commit mail fraud.

Question 14

Package labels must use words that the ordinary consumer understands.

Question 15

A loan between two consumers is NOT subject to the Truth-in-Lending Act.

Question 16

Counteradvertising is when the FTC requires a company found guilty of deceptive advertising to advertise anew to inform the public about earlier misinformation.

Question 17

An ad that contains a "half truth"-information that is true but incom?plete-is considered deceptive.

Question 18

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

Question 19

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

Question 20

Telephone solicitation using an automatic dialing system is NOT prohibited.

Question 21

Orange Company makes sunglasses.The company's ad states that "if you aren't wearin' an Orange,you aren't gettin' any 'see'." 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 22

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

Question 23

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

Question 24

Account numbers on credit-card receipts must be shortened so that merchants,employees,and other with access to the receipts cannot obtain a consumer's name and full credit-card numbers.

Question 25

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

Question 26

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

Question 27

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 28

The Consumer Product Safety Commission can ban a product that it be?lieves poses an "unreasonable risk" to consumers.

Question 29

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

Question 30

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 31

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

Question 32

The Pure Food and Drug Act of 1906 was Congress's first attempt to pro?tect con?sumers against the dangers of cigarette smoking.

Question 33

State consumer protection laws are directed at deceptive trade practices.

Question 34

Wild Things,Inc.(WTI),in its ads,makes claims about its prod?ucts 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 35

Super Saddles,Inc.runs an ad with the statement "Super Saddles are truly super!" in a nationally circulated horse magazine.The statement is an example of

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

Question 36

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

Question 37

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

Question 38

The most significant consumer protection provision of the Uniform Commercial Code is the one that recognizes unconscionability.

Question 39

To collect a debt,a credit collection agency may take any steps it deems necessary.

Question 40

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 41

Julia receives an unsolicited credit card in the mail.The next day,the card is stolen and the thief makes $5,000 of charges.The credit card company

A)can charge Julia for $2,500.
B)can charge Julia for $5,000.
C)can charge Julia for $100.
D)cannot charge Julia for any of the charges.

Question 42

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 43

The Federal Trade Commission (FTC) rules that Hairy Heads,Inc.,engages in de?ceptive advertising when it markets its product Hairy Head Helper as able to eliminate baldness in two weeks or less. In an action against Hairy Heads re?gard?ing Hairy Head Helper,the FTC orders Hairy Heads to run a series of ads informing the public that Hairy Head Helper cannot actually eliminate baldness. This is

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

Question 44

Like other manufacturers and sellers,Happy Household 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 45

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 46

Blythe's application to Community Bank for a credit card is denied.Blythe 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 47

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 48

Bob borrows $6,000 from his credit union to pay for a car he is purchas?ing. Bob mails the payments to the credit union. This transaction is subject to

A)the FTC Mail-Order Rule.
B)the Fair Packaging and Labeling Act.
C)the Truth-in-Lending Act.
D)the Energy Policy and Conservation Act.

Question 49

Albert's All-You-Can-Eat Buffet is a national chain with restaurants in every state.Under the Patient Protection and Affordable Care Act of 2010,Albert's must post the

A)caloric content of the foods.
B)origin of the foods.
C)price of the foods.
D)chemical composition of the foods.

Question 50

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 practice is most likely to result in

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

Question 51

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 52

Paychex Loan Company extends credit in the ordinary course of its busi?ness.Under the Truth-in-Lending Act,Paychex 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 53

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

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

Question 54

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 that a call is a sales call.
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 55

Owen signs an installment contract with Pixel Video Store to finance the purchase of a new 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 56

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 57

Sally's Sofamart runs an ad in the local paper.The ad will be considered deceptive if

A)a reasonable consumer would be deceived by one of its claims.
B)it contains puffery.
C) it contains obvious exaggerations.
D)it contains scientific terms.

Question 58

Excellent Exercise Equipment,Inc.(EEE) advertises a treadmill for $199. When Garth tries to buy one of the treadmills,George,the salesperson,tells him that they are backordered and will take over a year to arrive.George then shows Garth another treadmill that is $1,999 and tells him that he can have the more expensive model delivered the next day.This is

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

Question 59

GR8 Fashion,Inc.,complains to the Federal Trade Commission (FTC) about an ad broadcast by Hotte 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 GR8 to broadcast similarly deceptive counteradvertising.

Question 60

Jillian and Ruth are neighbors.In the ordinary course of their respective businesses,neither Jillian nor Ruth lend money,sell on credit or arrange for the extension of credit.Jillian sells Ruth a lawn mower that Ruth must pay for through six months of monthly payments.The sale is

A)covered by the Truth-in-Lending Act.
B)not covered by the Truth-in-Lending Act.
C)illegal under the Truth-in-Lending Act.
D)covered by the Truth-in-Lending Act only if the price of the lawnmower exceeds $500.

Question 61

The credit department of Mega-Mart often calls Nora at work about an overdue bill.Nora's employer objects.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 62

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 63

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.

Question 64

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 65

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

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

Question 66

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 67

Steel Tool Company makes and sells tools.One of the tools is believed to be haz?ardous.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 68

Leo opens a credit card account with Macro Credit,Inc.Nina steals Leo's identity and makes unauthorized charges on the card.Under the Fair and Accurate Credit Transactions Act,Macro must

A)expunge all information about Leo from its records.
B)issue a new identity to Leo as an opportunity for a fresh start.
C)maintain the charges on Leo's records for seven years.
D)provide Leo with copies of its records that help to prove the theft.

Question 69

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

Question 70

Fiona goes to GreatNuTech,a consumer electronics store in Houston,Texas,to buy a pocket calculator.Ilsa,the salesperson,sells Fiona a top-of-the-line home theater,which Fiona does not need and cannot af?ford.This is a violation of

A)no federal or state law.
B)the Consumer Sales Act.
C)the Texas Deceptive Trade Practices Act.
D)the Truth-in-Lending Act.

Question 71

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 ac?tion 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 72

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.