Deck 24: Consumer Law

Question 1

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

Answer 1

True

Question 2

Package labels must use words that the ordinary consumer understands.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

Ads can be unfair but not deceptive.

Question 5

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

Question 6

Obvious exaggerations are not permissible in advertising.

Question 7

When an advertising claim has the appearance of authenticity, it does not create problems.

Question 8

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

Question 9

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

Question 10

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

Question 11

Vague generalities are permissible in advertising.

Question 12

Advertising that contains an endorsement by a celebrity is presumed to be deceptive.

Question 13

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 14

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 15

Puffery constitutes deceptive advertising.

Question 16

The Federal Trade Commission was created to prevent unfair and deceptive trade practices.

Question 17

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

Question 18

Ads must disclose relevant limitations underlying their claims.

Question 19

Ads must disclose qualifying information underlying their claims.

Question 20

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

Question 21

Account numbers on credit-card receipts must be truncated (shortened).

Question 22

Consumers who are charged more for credit or insurance than others ordinarily would be because of their credit reports must be notified of that fact.

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

Imported foods do not have to meet U.S. safety standards.

Question 29

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

Question 30

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

Question 31

Through careless manufacturing practices, Plastics Company makes and sells products that are unsafe to consumers. This may be subject to sanctions under​

A) ​federal and state law.
B) ​federal law only.
C) ​no law, according to the principles of freedom to contract.
D) ​state law only.

Question 32

Credit can be denied if a person receives a certain form of income.

Question 33

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 34

Soundbytes Corporation sells phones. Soundbytes's ad states that voice on its phones is "clear as blue 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) ​none of the choices.

Question 35

Home Products, Inc., in its advertisements, makes false claims about its own products and about the products of its competitors. The firm 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 36

A credit-card company may increase the interest rate on a customer's credit-card balance at any time.

Question 37

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

Question 38

Lawncare Company and Mowers, Inc. make yard tools. Both companies use only steel produced in the United States. Lawncare's ad claims, "We use only U.S. steel, while our competitors use inferior foreign steel!" This statement is​

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

Question 39

A consumer may be denied credit or insurance on the basis of his or her credit report, and need not be notified of that fact.

Question 40

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 41

Under federal law, the calorie content of the food on a menu must be posted by Great Harvest, LLC, if the firm 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 42

Teri borrows $10,000 from USA 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 43

Spicy Salsa Company complains to the Federal Trade Commission (FTC) about an ad by Tangy Sauces Inc., Spicy'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 distribute a similarly deceptive counter-ad.

Question 44

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 45

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 46

Credit Loan Company extends credit in the ordinary course of its business. Under the Truth-in-Lending Act, The lender 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) ​Credit Loan's credit terms.
D) ​the borrowers' credit scores.

Question 47

Cleaners & Solvents, Inc. (CSI), falsely claims in its ads that its products kill germs "forever." In an action against CSI, the firm is ordered to stop its false advertising. This is​

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

Question 48

ChemCo, Inc., makes and sells products containing ingredients potentially hazardous to consumers. The government agency that has the authority to order ChemCo to remove a product from the market is​

A) ​the Consumer Product Safety Commission.
B) ​none of the choices.
C) ​the Federal Trade Commission.
D) ​the Food and Drug Administration.

Question 49

Wellness Insurance Company offers health insurance to consumers. Under current federal law, Wellness must not​

A) ​deny coverage for preexisting conditions.
B) ​enable more children to obtain health-insurance coverage.
C) ​allow adults under twenty-six to remain on their parents' health policies.
D) ​end lifetime and most annual limits on care.

Question 50

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

Question 51

To generate sales, Golden Investments, Inc., uses phone solicitation. Under federal law, in soliciting business, Golden'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 52

Cutting Edge Inc. makes and sells tools. One of the tools is believed to be hazardous. The firm 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 53

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 54

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

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

Question 55

Mattress Company advertises a special sale-all bedding, half price. The ad does not state that the sale price does not include delivery or shipping costs. To avoid claims of deceptive advertising, Mattress should​

A) ​clearly and conspicuously disclose the shipping cost in its ads.
B) ​display the shipping cost in small print on ads displayed in stores.
C) ​include the shipping cost in small print on its receipts.
D) ​not reveal the shipping cost.

Question 56

Mac n' Cheese Company wants to make and market new processed pasta and sauce products. On each product's label, standard nutrition facts are​

A) ​prohibited.
B) ​required.
C) ​voluntary.
D) ​arbitrary.

Question 57

Breadboard, Inc., makes and sells a variety of grain products. Breadboard'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 58

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 59

Pro Motor Company makes cars. Federal law requires Pro to attach a 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 the car maker chooses.

Question 60

An ad for Running Shoes Inc. states that its products are "The Athlete's 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 61

Phil has a credit card from Quality Credit, Inc. Quality wants to change to the terms. The firm​

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

Question 62

Greg signs an installment contract with Home Appliance Store to finance the purchase of new kitchen appliances. 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 63

Bea borrows funds from Credit Union to repair her home and to buy a car. She buys a laptop from Discount 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 64

QT Collection Agency calls Rob several times a day, and sometimes in the middle of the night, about an overdue bill that Standard Credit Company 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 65

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 66

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 67

Consumer Finance Corporation (CFC) extends credit to consumers. CFC is subject to the Equal Credit Opportunity Act, which prohibits credit discrimination based on​

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

Question 68

Kip opens an account at Lotsa Goodies, and buys a digital music player and other items, but makes no payments on the account. To collect the debt, a Lotsa Goodies representative 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 69

In the ordinary course of business, Loan2Buy Corporation offers credit to consumers and reports on the loans to credit agencies. 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 70

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 71

Dian takes out a loan from Equity Bank. When she fails to make the scheduled payments, Equity 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 72

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.