Question 1

The Magnuson-Moss Warranty Act requires manufacturers to provide a warranty on their products regardless of cost.

Accepted Answer

The Magnuson-Moss Warranty Act does not require manufacturers to provide a warranty for their products; it only sets the rules that must be followed if they choose to offer a warranty.

Question 2

The Federal Trade Commission Act considers the terms "deceptive" and "unfair" to be synonymous when determining what practices should be prohibited.

Accepted Answer

The Federal Trade Commission Act considers "deceptive" and "unfair" to be two separate concepts and has separate criteria for determining what practices fall under each category.

Question 3

In 30-year mortgages, the finance charge typically exceeds the amount of the principal.

Accepted Answer

This is because the interest on the loan accumulates over the 30-year period, resulting in a larger finance charge than the original principal amount borrowed.

Question 4

Consumers may keep as a gift any unordered merchandise that they receive in the mail.

Accepted Answer

According to the Federal Trade Commission's "Unordered Merchandise" rule, consumers are not obligated to return or pay for any merchandise that they did not order, and they may consider it a gift.

Question 5

"Bait-and-switch" tactics are not a violation of FTC rules if the merchant does not have enough stock on hand to meet reasonable demand for the advertised product.

Accepted Answer

Bait-and-switch tactics are considered a violation of FTC rules regardless of the merchant's stock levels, as they involve advertising a product with the intention of selling a different product.

Question 6

The Consumer Financial Protection Bureau (CFPB) was created to represent consumers by filing suit in federal court asking for damages on behalf of the injured consumer.

Accepted Answer

The CFPB was created to promote consumer protection, but it is not authorized to file lawsuits on behalf of individuals. It can, however, take action against companies that violate consumer protection laws and seek penalties and restitution for affected consumers.

Question 7

Blogs and social media ads must clearly indicate that they are, in fact, ads by including some equivalent of "ad" or "sponsored."

Accepted Answer

The Federal Trade Commission requires that all social media ads and sponsored content must be clearly labeled as such to avoid misleading consumers. This applies to both blogs and social media platforms.

Question 8

Ron's Furnace Repair advertised it would inspect any homeowner's furnace for free. Janet had Ron's come to inspect her furnace. The servicewoman dismantled the entire furnace then refused to put it back together unless Janet paid her $250. The FTC considers such a practice to be

Accepted Answer

The FTC would consider this practice to be all of the above: unfair because it imposes a significant and unjustified financial burden on the consumer; deceptive because the initial offer of a free inspection likely implies it does not come with strings attached like dismantling and then demanding payment for reassembly; and a violation of public policy because it goes against the general principles of fairness and transparency in business practices.

Question 9

Under the Fair and Accurate Credit Transactions Act (FACTA),

Accepted Answer

The Fair and Accurate Credit Transactions Act (FACTA) gives consumers the right to obtain one free credit report every year from each of the three major credit reporting agencies: Equifax, Experian, and TransUnion. Options A, B, and C are addressed by other laws such as the Equal Credit Opportunity Act and the Fair Debt Collection Practices Act.

Question 10

Company policy of PushOne, Inc. is to block the company name and telephone number on potential customers' Caller ID systems so they won't know the call is from a telemarketer. This policy violates FTC rules.

Accepted Answer

The FTC's Telemarketing Sales Rule requires telemarketers to transmit Caller ID information that accurately identifies the caller. Blocking the company name and telephone number goes against this rule.

Question 11

An employer cannot request a consumer report on a potential employee without that person's permission.

Accepted Answer

The Fair Credit Reporting Act (FCRA) requires employers to obtain written consent from a job applicant before obtaining a consumer report from a consumer reporting agency.

Question 12

Chase received a magazine in the mail that he did not order. He was surprised, but read and enjoyed the magazine. A month later, another copy arrived, along with a bill for $25 to cover the subscription. Which of the following applies to this situation?

Accepted Answer

Chase is not obligated to pay for unsolicited goods sent to him. According to consumer protection laws in many jurisdictions, if you receive items that you did not order, you are under no obligation to pay for them or return them.

Question 13

Brett applies for a $60,000 loan to purchase a tractor for his farm business. This loan is subject to TILA disclosure requirements.

Accepted Answer

The answer of Brett applies for a $60,000 loan to...

Question 14

The issue in the POM Wonderful, LLC v. FTC case involved

Accepted Answer

The POM Wonderful, LLC v. FTC case involved the issue of the type of evidence necessary to support health claims in advertisements. Specifically, POM Wonderful had made claims about the health benefits of drinking pomegranate juice without adequate scientific evidence to support those claims, which led to a lawsuit by the FTC.

Question 15

The Equal Credit Opportunity Act makes it illegal for a lender to discriminate against a potential borrower because of race, national origin, religion, or sex, but it is permissible to treat a borrower differently if he or she is on welfare.

Accepted Answer

The Equal Credit Opportunity Act makes it illegal for a lender to discriminate against a potential borrower based on race, national origin, religion, sex, marital status, age, or whether the borrower receives public assistance. Therefore, it is not permissible for a lender to treat a borrower differently if he or she is on welfare.

Question 16

The FTC may consider an act unfair if it simply violates public policy.

Accepted Answer

The FTC may consider an act unfair if it violates public policy, as this would harm consumers and undermine the public interest.

Question 17

Prime Products, Inc. found out that it was going to take 3 weeks to ship the comforter Margaret ordered instead of the 7 days it had originally promised her. Prime Products must cancel Margaret's order and notify her that it can deliver within 3 weeks if she wants to reorder.

Accepted Answer

The company is not required to cancel the order but must notify Margaret of the delay and give her the option to consent to the delay or cancel the order herself.

Question 18

For the FTC to consider a practice to be unfair, it must meet a three-part test. Which of the following is NOT one of those tests?

Accepted Answer

The three-part test for the FTC to consider a practice unfair includes that the practice causes a substantial consumer injury, the harm of the injury outweighs any countervailing benefit, and the consumer could not reasonably avoid the injury. The consumer recouping lost funds is not part of the test.

Question 19

Electronic payments via a telephone, computer, or wire transfers are not regulated by the government.

Accepted Answer

Electronic payments are regulated by the government through various laws and regulations, such as the Electronic Fund Transfer Act and the Payment Card Industry Data Security Standard.

Question 20

The Truth in Lending Act applies to private individuals who loan money.

Accepted Answer

The Truth in Lending Act (TILA) applies to creditors who regularly extend credit or credit-like transactions in the ordinary course of their business. Private individuals who loan money on an occasional basis are not typically covered by TILA.

Quiz 39: Consumer Protection