Deck 45: Consumer Law

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

Labels on fresh meat must indicate where the food originated.

Question 5

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

Question 6

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

Question 7

A sanction known as counteradvertising requires a company to advertise the products of its competitor to counter its own false claims.

Question 8

Bait-and-switch advertising 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 9

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

Question 10

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

Question 11

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

Question 12

A creditor has the right to garnish a debtor's wages unless the debt has gone unpaid for a prolonged period.

Question 13

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

Question 14

Food products are not required to bear labels detailing the nutritional content.

Question 15

Ads cannot be unfair.

Question 16

Vague generalities and obvious exaggerations constitute deceptive advertising.

Question 17

Manufacturers are required to report on any products already sold if the products have proved to be hazardous.

Question 18

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

Question 19

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

Question 20

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

Question 21

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 22

Sweet Treats, Inc., wants to market a new snack food. On the prod?uct's la?bel, standard nutrition facts are

A) prohibited.
B) required.
C) strictly voluntary.
D) warranted by the nature of the food.

Question 23

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 24

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 ac?tion 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 25

In the ordinary course of business, Xtra Credit 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 is most likely to result in

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

Question 26

Shep buys a car from his neighbor, Tyrone, for $8,000 and agrees to make monthly payments of $800 until the price is paid. This transaction is not sub?ject to federal credit regulations because

A) the parties are two consumers.
B) the transaction is a sale.
C) the sale involves a car.
D) the parties are neighbors.

Question 27

Wheels & Deals Corporation is subject to the Truth-in-Lending Act, which is a key statute regulating the credit and credit-card industries and concerns

A) the credit-worthiness of financial institutions.
B) the disclosure of credit terms.
C) the limits on types of credit.
D) the limits on types of debt.

Question 28

Va-Va-Voom Products, Inc., engages in de?ceptive 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 adver?tising 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 29

To generate sales, Yakkity-Yak, Inc., uses phone solicitation. Under federal law, 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 30

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 31

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 32

Green Grocer Corporation makes and markets a variety of processed food products. The federal agency responsible for enforcing health regula?tions con?cerning 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 33

Quackity Quack Company's ad states that its product is "the best on the market today." Because of this ad, the Federal Trade Com?mission is most likely to

A) do nothing.
B) draft a formal complaint.
C) issue a cease-and-desist order.
D) require counteradvertising.

Question 34

Through unfair trade practices, Super Sales Company induces Trey and other consumers to enter into one-sided deals. 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 35

Home Brand Products, Inc., in its ads, makes claims about its prod?ucts that are obvious exaggerations and claims that are false but appear to be true. Home Brand may be subject to sanctions for

A) neither the claims nor the exaggerations.
B) only the claims.
C) only the exaggerations.
D) the claims and the exaggerations.

Question 36

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 37

Tonya 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 38

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.

Question 39

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 40

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 41

Darren wants to go into the business of direct merchandise sales. What are the legal problems that Darren might encounter in telemarketing? In sell?ing door-to-door? In marketing over the Internet? In soliciting sales through the mail?

Question 42

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 to request verification of the debt, during which its payment will be suspended, 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?