Deck 13: Consumer Law

Question 1

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 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

When an advertising claim has the appearance of authenticity but is not factually supported, it is legal under the claim of puffery.

Question 6

Package labels must use words that the ordinary consumer understands.

Question 7

Legally, ads can be unfair but not deceptive.

Question 8

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 9

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

Question 10

Credit can be denied solely on the basis of race.

Question 11

The Nutrition Labeling and Education Act governs the use of terms such as fresh on food labels.

Question 12

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

Question 13

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

Question 14

Puffery constitutes deceptive advertising.

Question 15

Creditors attempting to collect debts are generally considered to be debt-collection agencies under the Fair Debt Collections Practices Act.

Question 16

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

Question 17

The Food and Drug Administration is responsible for ensuring the safety of new drugs.

Question 18

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

Question 19

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

Question 20

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

Question 21

Merchants must ship orders within the time promised in their ads and notify consumers when orders cannot be shipped on time.

Question 22

Ads must disclose relevant limitations underlying their claims.

Question 23

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

Question 24

The Federal Trade Commission is charged with preventing unfair and deceptive trade practices.

Question 25

Advertising that contains an endorsement by a celebrity will be deemed deceptive if the celebrity does not actually use the product.

Question 26

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 27

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 28

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

Question 29

The Fair Debt Collection Practices Act attempts to ensure that creditors are always paid by debtors.

Question 30

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 31

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.

Question 32

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 33

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 34

A consumer who receives an unsolicited credit card can be charged by the company that issued the card with any unauthorized charges.

Question 35

One of the most important federal consumer protection laws directed at deceptive trade practices is the Federal Trade Commission Act.

Question 36

Manufacturers are required to report to the Consumer Product Safety Commission any products intended for sale if the products have proved to be hazardous.

Question 37

Ads must disclose qualifying information underlying their claims.

Question 38

Vague generalities and obvious exaggerations are permissible in advertising.

Question 39

Kristen buys several pair of designer shoes online from Luxury Footwear, Inc. Under the Federal Trade Commission's Mail or Telephone Order Merchandise Rule, Luxury is required to​

A)give an estimated shipping time.
B)ship the order within the time promised in Luxury's ad.
C)ship the order at Luxury's expense if the amount is above a certain level.
D)all of the choices.

Question 40

Comfy's Bed 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. Comfy's charges $250 for shipping any mattress. To avoid any claims of deceptive advertising, Comfy's should​

A)clearly and conspicuously disclose the shipping cost in its ads.
B)display the shipping cost in small print on Mello's Web page.
C)include the shipping cost on the last page of Mello's Web site.
D)not reveal the shipping cost.

Question 41

Urban Loan Company extends credit to consumers. Urban is subject to the Equal Credit Opportunity Act, which prohibits credit discrimination based on which of the following

A)credibility.
B)financial awareness.
C)occupation.
D)gender.

Question 42

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. If done systematically, this is

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

Question 43

Tory applies for a line of credit which she intends to use for a once-in-a-lifetime dream vacation. 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 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 maker with twenty or more products.
D)a food producer with twenty or more acres.

Question 45

Corner Market sells groceries. Delta Food & Drug Store sells groceries and fills prescriptions. The party with the chief responsibility to monitor and enforce laws designed to protect consumers from unsafe food and drugs 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 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

Marilyn receives an unsolicited credit card in the mail and tosses it on her desk. Without Marilyn's permission, her roommate Nancy uses the card to buy a new laptop for $1,800. Marilyn is​

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

Question 48

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 49

Cleaners & Solvents, Inc. (CSI), falsely claims in its ads that its product Dirt Remover kills germs "forever." In an action against CSI regarding Dirt Remover, the firm is ordered to stop its false advertising of Dirt Remover and its other products. This is​

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

Question 50

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

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

Question 51

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 52

Creditworthy Loan Company extends credit in the ordinary course of its busi-ness. 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 53

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 54

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)send a formal complaint.
B)investigate.
C)issue a cease-and-desist order.
D)order restitution.

Question 55

Smart Phone Company's ad states that its product is "The Clear Choice." 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 restitution order.
D)none of the choices.

Question 56

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 57

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 58

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 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 59

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

Greg signs an installment contract with Home Appliance Store to finance the purchase of new kitchen appliances-stove, refrigerator, dishwasher, microwave, and toaster oven-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 62

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 63

Dina takes out a student loan from Equity Bank. When she fails to make the scheduled payments for six months, Equity advises her of further action that it will take. This is likely 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 64

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)send a formal complaint.
C)issue a cease-and-desist order.
D)permit Spicy Salsa to broadcast similarly deceptive counteradvertising.

Question 65

QT Collection Agency calls Pat several times a day, and sometimes in the middle of the night, about an overdue bill that Regal Sporting Goods turned over to QT 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 66

Teri borrows $10,000 from USA National Bank to remodel a room in her home. If USA National Bank lends funds in the ordinary course of its business, 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 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

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 69

To generate sales, Goldline Investments, Inc., uses phone solicitation. Under federal law, in soliciting business, Goldline's telemarketers must disclose​

A)all material facts related to a sale.
B)only the seller's name.
C)only facts directly related to a potential customer's request.
D)only facts needed to make a sale.

Question 70

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 71

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 72

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

A)false and misleading.
B)impermissibly vague and general.
C)a deceptive half-truth.
D)puffery.