Deck 20: Consumer Protection

Question 1

Labels on fresh meat must indicate where the food originated.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

Common law judicial decisions that serve to protect the interests of consumers are not classified as consumer law.

Answer 3

False

Question 4

Counteradvertising requires a company to focus its marketing on point-of-sale displays.

Question 5

State laws often provide more sweeping and significant protections for the consumer than federal laws.

Question 6

Labels must be accurate.

Question 7

Counteradvertising requires a company to advertise the products of its competitor to counter its own false claims.

Question 8

There is no distinction between regulating the information dispensed about a product and regulating the actual content of the product.

Question 9

Labels must use words that are easily understood by the ordinary marketing executive.

Question 10

Food labels are not required to provide standard nutrition facts.

Question 11

All statutes that serve to protect the interests of consumers are classified as consumer law.

Question 12

All ads-both online and offline-must be truthful.

Question 13

Buyers of goods sold door to door can cancel their contracts within three business days.

Question 14

Vague generalities and obvious exaggerations constitute deceptive advertising.

Question 15

Bait-and-switch advertising occurs when an ad appears to be based on factual evidence but in fact is not reasonably supported by evidence.

Question 16

Labels on vegetables and fruits are not required to indicate where the food originated.

Question 17

An advertisement that contains an endorsement by a celebrity may be deemed deceptive if the celebrity does not actually use the product.

Question 18

Ads cannot be unfair.

Question 19

Puffery constitutes deceptive advertising.

Question 20

Advertising will not be deemed deceptive so long as it appears to be based on factual evidence,even if it is not.

Question 21

A collection agency must include a validation notice whenever it initially contacts a debtor for payment of a debt.

Question 22

A consumer may be denied credit on the basis of a credit report.

Question 23

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

Question 24

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

Question 25

Creditors are required to provide consumers with copies of records that can help the consumer prove that an account or transaction is fraudulent.

Question 26

A consumer who receives unsolicited merchandise must return it within three business days.

Question 27

Debt collectors who use a prohibited debt-collection tactic are exempt from liability if they can show that the debtor used misrepresentation in assuming the debt.

Question 28

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 29

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

Question 30

Orange Company makes computers.The company's ad states that "if you aren't eatin' an Orange,you aren't gettin' any 'C.' " The Federal Trade Commission would consider this ad

A)false and misleading.
B)impermissibly vague and general.
C)a deceptive half-truth.
D)none of the choices.

Question 31

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

Question 32

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

Question 33

Cleaners & Solvents,Inc.(CSI),engages in deceptive 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 34

Frosty's Appliance Store advertises freezers at a "Special Low Price of $299." When Garth tries to buy one of the freezers,Huey,the salesperson,tells him that they are all sold and no more are obtainable.Huey adds that Frosty's has other freezers for $2,299.This is

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

Question 35

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

Question 36

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

Question 37

The key federal statute regulating the credit and credit-card industries is basically a disclosure law.

Question 38

A credit-card company is not required to provide advance notice to consumers before changing credit-card terms.

Question 39

Merchants must ship orders within the time promised in their ads.

Question 40

Va-Va-Voom Products,Inc.,engages in deceptive advertising when it markets its product Weight-No-More as able to help consumers lose weight in their sleep.Va-Va-Voom is ordered to include in all future advertising of Weight-No-More the statement,"This product will not cause anyone to lose weight while sleeping." This is

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

Question 41

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 all material facts related to a sale.
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 42

Creditworthy Loan Company extends credit in the ordinary course of its business.Under the Truth-in-Lending Act,which is the key federal statute regulating the credit and credit-card industries,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 43

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 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 appealing to the average consumer.

Question 45

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 46

Brad borrows $20,000 from Citizens Bank to repair his home and to buy a car.Brad buys a stereo from Deep Discount Store in a transaction financed by Deep.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 47

Vanna and many other consumers complain to the Federal Trade Commission (FTC)that a Whoopie Wonders 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)require counteradvertising.

Question 48

Kristen receives unsolicited merchandise in the mail.Kristen

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 49

Special Roast Coffee,Inc.,processes and sells a variety of coffee products.Special Roast'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 50

GR8 Fashion,Inc.,complains to the Federal Trade Commission (FTC)about an ad broadcast by Hott 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 51

Paychex Loan Company extends credit in the ordinary course of its business.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)no credit terms.
C)only its own credit terms.
D)only the credit terms that will convince borrowers to "close the deal."

Question 52

Essential Foods Corporation makes and markets a variety of processed food products.The federal agency responsible for enforcing health regulations concerning food 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 53

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 54

Upson Down Company sells its wares to consumers over the Internet.Upson's site includes an on-screen notice indicating its refund and return policies,where its business is physically located,its legal name,and other details.This is

A)dictated by members of the Good Business Association.
B)mandated by federal law.
C)required by California state law.
D)strictly voluntary.

Question 55

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 56

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 57

Fun-E Products,Inc.,makes and sells toys.The government agency that has the authority to remove a potentially 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 58

Travel Tours Company faxes ads to Uri 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 59

Steel Tool Company makes and sells tools.One of the tools is believed to be hazardous.The appropriate government agency may require Steel 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 60

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)Corner Market and Delite Food & Drug Store.
B)those who consume the products.
C)the Federal Trade Commission.
D)the Food and Drug Administration.

Question 61

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 62

The credit department of Metro-Mart calls Nikki at work about an overdue bill.Nikki's employer objects.Metro-Mart continues to call Nikki at work.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 63

In the ordinary course of business,EZ Funds Corporation offers credit to Fay and other consumers and reports on the loans to credit agencies.To save time and money,EZ 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 64

Quik 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 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

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 personal computer 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 66

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 67

Bodie's application to City Bank for a credit card is denied.Bodie 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 68

Furniture Depot sells Gail a bedroom suite on credit.Gail fails to make the scheduled payments for six months.Furniture Depot sends her a letter,asking for immediate payment.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 69

Dita takes out a student loan from Everloan Bank.When she fails to make the scheduled payments for six months,Everloan 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 70

Milo buys an all-terrain-vehicle (ATV)from No-Limit Toys,Inc.,on credit but makes no payments on the account.Odell,the owner of No-Limit Toys,calls Milo at home on a Monday morning at three
a.m.Odell represents himself as PayNow Collection Agency and demands payment "or else." The next day,Odell sends Milo notice that he has thirty days in which to request verification of the debt and that its payment will be suspended during that time,but that if he does not pay the full amount due within five business days,Odell will arrange for the "destruction of Milo's good credit rating." Which laws has Odell violated,if any,and in what ways?

Question 71

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 72

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

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