Deck 15: Product Liability and Consumer Protection

Question 1

"Slamming" is the illegal practice of changing a consumer's telephone service without permission.

Answer 1

True
Explanation: The illegal practice of changing a consumer's telephone service without permission is referred to as slamming. The Federal Communications Commission (FCC) has created new anti-slamming rules that provide a remedy for consumers who have been slammed. With these rules, the FCC has taken the profit out of slamming and protected consumers from illegal charges.

Question 2

An FTC order, under which a company agrees to stop a disputed practice without necessarily admitting that it violated the law, is called a consent order.

Answer 2

True
Explanation: A consent order is an order under which the company agrees to stop the disputed practice without necessarily admitting that it violated the law. If an agreement cannot be reached, the FTC may issue a complaint which begins a formal hearing before an administrative law judge. If a violation of law is found, a cease-and desist order or other appropriate relief may be issued.

Question 3

Persons who receive unordered merchandise in the mail may treat it as a gift.

Answer 3

True
Explanation: People who receive unordered merchandise through the mail may treat it as a gift. They may keep the merchandise or dispose of it in any manner they see fit without any obligation whatsoever to the sender. Similarly, it is illegal to send a bill for such unordered merchandise or to send dunning letters (letters requesting payments).

Question 4

The Equal Credit Opportunity Act makes it illegal for businesses to discriminate against credit applicants receiving public assistance income.

Question 5

Under the doctrine of strict liability, when a product is obviously dangerous, a manufacturer has no duty to warn consumers of potential injuries.

Question 6

A successful plaintiff in a product liability suit always recovers punitive damages.

Question 7

The Federal Trade Commission requires used car dealers in most states to display statements that the cars are sold "as is" if the cars are sold with no warranties.

Question 8

The FTC's "Cooling-Off" Rule applies to sales that are entered completely by phone or by mail.

Question 9

Jarvis rents an apartment for a period of two months. His lease is governed by the Consumer Leasing Act.

Question 10

The annual percentage rate (APR) is calculated by consumers with tables provided by the Federal Trade Commission.

Question 11

A 900 telephone number bills the consumer for the telephone charge.

Question 12

A child is injured after swallowing a piece of glass hidden in a jar of jam. A court will award money for the injuries suffered only if the child or the child's parents purchased the jam.

Question 13

The seller of an automobile must provide a written statement disclosing the odometer reading at the time of the transfer of title of a motor vehicle.

Question 14

A credit cardholder is liable for all unauthorized charges if he or she does not report the unauthorized charges within twenty days of receiving a statement on which the unauthorized charges appear.

Question 15

A plaintiff in a strict liability case may not recover punitive damages.

Question 16

The purpose of a bait-and-switch scheme is to switch customers from buying the advertised merchandise to buying something else that is usually more expensive.

Question 17

Public policy is the equivalent of Weber's social consensus in that it refers to the idea that certain activities affect the entire social structure and must be regulated by the government.

Question 18

According to the Consumer Product Safety Act, interstate commerce consists of local business activity carried on within state boundaries.

Question 19

Robin orders merchandise from Internet Enterprises. If no delivery date is promised, Internet must ship the merchandise within ten days.

Question 20

The "Opening Case Round 2" involving the Federal Trade Commission and the Hobby Lobby case discussed whether the people making decisions at Hobby Lobby can benefit from corporate rights flowing to the people behind the corporate veil.

Question 21

To which type of transaction does the negative option rule apply?

A) Subscription to CD or DVD clubs that sends products on a regular basis and require the consumer to opt out of the next shipment
B) Buying used cars
C) Subscription to telephone services
D) Buying goods via telephone or Internet

Question 22

Which of the following is true of the "Cooling-Off" Rule?

A) It gives consumers an opportunity to change their minds after signing contracts with people who come to their homes for product sales.
B) It allows sales of consumer goods or services under $25, made away from the seller's place of business, to be cancelled within three business days after the sale.
C) It requires the seller to give the buyer one copy of a cancellation form, which the buyer may send to the seller any time before the third business day after the sale.
D) It does not apply to consumer product parties given in private homes and to sales made in rented hotel rooms or restaurants.

Question 23

The prime target of the ____________ has been handguns.

A) Consumer Product Safety Act
B) dangerous per se rule
C) telemarketing sales rule
D) negative option rule

Question 24

Renee applied for credit to open her own beauty salon. The bank denies her the credit after learning she was recently divorced and receives public assistance income. Which of the following federal laws did the bank violate?

A) The Fair Debt Collections Act
B) The Equal Credit Opportunity Act
C) The Truth-in-Lending Act
D) The Fair Credit Reporting Act

Question 25

Local business activity carried on within state boundaries is known as:

A) public commerce.
B) interstate commerce.
C) intrastate commerce.
D) local commerce.

Question 26

After receiving her credit card bill, Claire feels that the credit card company has made a mistake. Several transactions are not hers. The law that has established procedures for the prompt handling of such billing disputes is known as the:

A) Fair Credit Reporting Act.
B) Fair Credit Billing Act.
C) Fair Debt Collection Practices Act.
D) Truth in Billing Act.

Question 27

Which of the following entities are allowed to send merchandise through the mail to people who did not order it?

A) Hospitals
B) Local businesses
C) Governmental units
D) Charitable organizations

Question 28

Jackson Motors tells Sue, a consumer, that Bliss Automobiles are made with metal bodies when they are in fact made of fiberglass. This would be considered a(n):

A) fraudulent misrepresentation.
B) sales puffery.
C) bait-and-switch scheme.
D) act of dunning.

Question 29

Which of the following statements holds true of the FTC's Telemarketing Sales Rules?

A) Calling times are restricted to anytime during business days.
B) A telemarketer is allowed to call a consumer without requiring the consumer's consent.
C) Telemarketers must state the total cost of the products or services offered and that the sale is final or nonrefundable.
D) Telemarketers are excused from disclosing the name of the seller, and what they are selling before they make their pitch.

Question 30

Under the ____________, sellers must ship orders within the time promised in their advertisements. If no time period is promised, sellers must either ship the order within 30 days or send the consumer an option notice.

A) telemarketing sales rule
B) negative option rule
C) Cooling-Off Rule
D) Mail and Telephone Order Rule

Question 31

Cristina receives a new credit card from Seventh National Bank that does not provide a means for a retailer to verify that the holder of the card is in fact authorized to use it. The next day, Cristina discovers that she has lost her card. As soon as she discovers the card is missing, she calls Seventh National to report the loss. Already, $620 worth of unauthorized charges have been made on her credit card. Under the Truth-in-Lending Act Cristina will:

A) have to pay for the entire $620 of unauthorized charges.
B) have to pay for $50 of the unauthorized charges.
C) not have to pay any amount of the unauthorized charges.
D) have to pay for 50% of the unauthorized charges.

Question 32

Mary contracts to lease an automobile from Zippo Sales with payments of $300 per month for a year and a final balloon payment of $1,200. This final payment is:

A) lawful, since it satisfies the requirements of the Consumer Leasing Act.
B) unlawful, since it exceeds $1,000.
C) unlawful, as it exceeds three times the average monthly payment.
D) lawful, since both parties have contracted on mutual agreement.

Question 33

The ____________ is an attempt by the federal government to reduce the use of unsolicited commercial e-mails on the Internet.

A) Can Spam Act
B) Mail and Telephone Order Rule
C) Truth-in-Mailing Act
D) Anti-Slamming Law

Question 34

Congress passed the ____________ which requires lenders to disclose the finance charge and the annual percentage rate.

A) Fair Credit Reporting Act
B) Equal Credit Opportunity Act
C) Truth-in-Lending Act
D) Fair Debt Collection Practices Act

Question 35

A knife made by Knife Co has a metal handle with no warning, and the manufacturer has received reports that some consumers have received electrical shocks when attempting to use the knife as a screwdriver while installing an electrical outlet. Athena is one such consumer and decides to sue the manufacturer and the seller. Which of the following is true of this situation?

A) Athena can sue the manufacturer, since there is no specific warning label on the knife.
B) Athena cannot file a suit as a warning label may not reduce the likelihood of an injury in case of a knife.
C) Athena cannot file a suit against the manufacturer, since the danger presented by the product is obvious.
D) Athena can bring a lawsuit against the manufacturers, stating that the warning on the product was inadequate.

Question 36

David went to the store to purchase a $15 MP3 player, advertised in the paper. The salesperson was encouraged by the store not to sell that MP3 player since it created a loss for the store. Instead, the salesperson told David that although the MP3 player was on sale, it was an undesirable, bottom-of-the-line product, and that David would be much happier with an Apple iPod Nano CD player for $250. The store:

A) acted in good faith when it tried to offer a better product.
B) can be sued under the policy of negligence and strict liability.
C) can be held guilty of a bait-and-switch scheme.
D) can be held guilty of fraudulent misrepresentation.

Question 37

Even though Spice gives her four-year-old car to Homeless Helpers Charity, she:

A) need not provide an odometer statement.
B) must provide an odometer statement.
C) need not provide an odometer statement, since the car is not over 15 years old.
D) must set the odometer to zero before resale.

Question 38

Which of the following is not a requirement for strict product liability?

A) The product must be in a defective condition when the defendant sells it.
B) The product must be unreasonably dangerous to the user or consumer because of its defective condition.
C) The defective condition must be the proximate cause of the injury or damage.
D) The defective condition of the goods must have been changed from the time the product was sold to the time the injury occurred.

Question 39

Which of the following is true of public interest and public policy?

A) Public interest promotes behaviour complying with the public consensus, while public policy refers to the idea that certain activities affect the entire social structure.
B) Public interest is the consensus and public policy is the coercive social engineering strategy by which that consensus is implemented.
C) Public interest promotes the making of safe goods to coerce the public policy to maintain a social structure that promotes health and safety, and prevents illness and injury.
D) To meet the goal of public policy, public interest insists that manufacturers, sellers, and distributors compensate a victim, who is injured by an unsafe product.

Question 40

Under the doctrine of ____________, the principal consideration is the safety of a product, not the conduct of the manufacturer or supplier of the goods.

A) public policy
B) negligence
C) public interest
D) strict liability

Question 41

Dillon received a call from a 900 telephone number and called it back without knowing that she would have to pay for the call. The telemarketer did not warn her about the cost of the call. She realized, for the first time when she received the telephone bill, that there was a charge for the call. Discuss.

Question 42

Xena's 1998 car's odometer stops working, and she does not repair it for six months because she is out of the country on business. Her family members drive her car while she is away. Xena is preparing to sell her car and honestly does not know the precise mileage on the car. Discuss what actions the law requires her to take after repairing the odometer while selling her car?

Question 43

MacLean went to an appliance store to buy an advertised camcorder. The salesperson discouraged him from buying the advertised product, saying that it was of very poor quality. The salesperson tried to talk MacLean into buying a more expensive camcorder of better quality. Discuss the case.

Question 44

Greenday Bank hires an agency to collect debt from one of its credit customers, Leon. The agency contacts Leon on his phone regarding the payment of the debt. Leon cites a family emergency and promises to visit the bank the next week. However, the agency sends a debt collector to Leon's house at 8 P.M. The debt collector does not find Leon at home and inquires about his whereabouts with the neighbors, telling them that Leon is indebted to Greenday Bank. The neighbors inform the debt collector that Leon is visiting his ill mother in Virginia. Analyze the case with regards to consumer credit laws.

Question 45

Samantha applied for a personal loan at a local bank in Illinois. The bank asked her to fill in an application form in which she was asked for her employment and marital status, as well as her age and her Social Security number. After reviewing her application, the bank denied her the loan because, it said, she was a 43-year-old divorcee-albeit a successful attorney-who received alimony payments and therefore, constituted a high risk. Analyze the case and Samantha's rights.

Question 46

Roberts bought a new ride-on lawn mower and allowed his son, Don, to be the first person to drive it. Due to a factory defect, the mower's gearshift stuck in reverse. Don was seriously injured when the mower backed into a ditch and tipped over. When Don sued the manufacturer for his injuries, the manufacturer argued that it was not liable because Don had not purchased the mower. Is Don likely to win his case? Why or why not?

Question 47

Jasmine discovered that she had been slammed by her old company, Voicetone, after she had paid her telephone bill to the company, Distant Enterprise. Discuss Jasmine's legal rights.

Question 48

Joslin orders merchandise by phone from Marginal Enterprises with no stated delivery date. When she does not receive it after a month, she contacts Marginal who indicates that due to a strike at their production plant, delivery that normally takes one month will take two months. Discuss Joslin's legal options.

Question 49

Alex, a painting contractor, purchased a movable Little Giant basket platform from Builder's Equipment Co. from which he or his employees could paint up to sixty feet off the ground. The platform malfunctioned, and Alex was injured when he fell from thirty feet. Discuss the type of product liability claim that Alex might bring against Builder's and Little Giant.

Question 50

Justin, who is on a business trip 500 miles away from home, decides to try a "free" Internet service that requires a credit card number and ends up costing $275. Justin wants to contest this charge. Explain in detail what he should do.