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Chapter 41. Consumer Protection
1. A consumer transaction would include one in which the purchaser uses the item at a hotel while on vacation.
a. True
b. False
2. In order to violate the FTC rules on advertising, a product would have to be affirmatively mislabeled.
a. True
b. False
3. If an advertising statement is technically true but may tend to mislead, the FTC can still require a company to stop
using it.
a. True
b. False
4. Since 1981, the Consumer Product Safety Commission has relied primarily on mandatory safety standards.
a. True
b. False
5. Under the Magnuson-Moss Warranty Act, if a store wishes to market a mini-camera for a retail cost of $5, it must
give a written warranty.
a. True
b. False
6. The Magnuson-Moss Warranty Act applies to all sales of goods covered by the Uniform Commercial Code.
a. True
b. False
7. If a written limited warranty is given for a consumer product, it may state that there is no warranty of
merchantability as long as this disclaimer is conspicuous.
a. True
b. False
8. One difference between a full and a limited warranty is that in a limited warranty, the manufacturer may, if
reasonable, limit the warranty of merchantability to two years.
a. True
b. False
9. If a manufacturer of a consumer product tells a buyer that he is selling it with no warranties, there is a violation of
the Magnuson-Moss Warranty Act.
a. True
b. False
10. On Monday, Bill agreed to buy aluminum siding for his home from Al, a door-to-door salesman. On Friday, he can
rescind the contract with no liability for breach of contract.
a. True
b. False
11. The Truth-in-Lending Act would not require disclosure of the amount that would be due if the borrower had paid
cash instead.
a. True
b. False
12. A description of the finance charges that said "1.8% per month compounded daily" would comply with the rules of
the Truth-in-Lending Act.
a. True
b. False
13. Stores may simply make warranties available to consumers upon request rather than including them on or in the
packaged goods.
a. True
b. False
14. Most states would invalidate prepayment penalties.
a. True
b. False
15. A collection agency may personally contact the debtor even if the debtor has engaged a lawyer to represent him.
a. True
b. False
16. The Fair Credit Reporting Act applies to consumer reporting agencies.
a. True
b. False
17. The Federal Trade Commission was created in 1968 in response to the consumer movement of the 1960s.
a. True
b. False
18. The Federal Trade Commission enforces antitrust legislation.
a. True
b. False
19. The Truth-in-Lending Act establishes maximum amounts of interest that can be charged for credit cards.
a. True
b. False
20. The Credit Card Fraud Act does not contain criminal penalties for violations of its provisions.
a. True
b. False
21. The FTC Act contains very specific definitions of the terms "unfair" and "deceptive."
a. True
b. False
22. The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 forbids credit card issuers from raising
interest rates or any fees during the first year a credit card account is open, and the Act states that gift cards or
certificates may not expire sooner than five years after issuance.
a. True
b. False
23. The Fair Debt Collection Practices Act applies directly to creditors.
a. True
b. False
24. Hazardous materials are specifically exempted from the jurisdiction of the Consumer Product Safety Commission.
a. True
b. False
25. Federal regulation prohibits a credit seller or lender from obtaining a nonpossessory security interest in household
goods if the interest is not a purchase money security interest.
a. True
b. False
26. Under the Consumer Credit Protection Act, a consumer has three days to withdraw from any credit obligation
secured by a mortgage on his home, even if the contract was not the result of a door-to-door sale.
a. True
b. False
27. The Magnuson-Moss Warranty Act contains disclosure and labeling requirements for sellers of consumer products
containing a written warranty.
a. True
b. False
28. The Food and Drug Administration is the oldest federal consumer protection agency.
a. True
b. False
29. A typical automobile financing agreement would be a closed-end credit agreement.
a. True
b. False
30. The Troubled Asset Relief Program enacted in 2008 was designed to strengthen the U.S. financial sector by
governmental purchase of assets and equity from financial institutions.
a. True
b. False
31. A cease and desist order, issued by the FTC, directs a party to stop a certain practice or face punishment, such as a
fine.
a. True
b. False
32. Ad substantiation, as required by an FTC policy statement, requires a company to have a reasonable basis for its
claims at the time it makes the claims.
a. True
b. False
33. There is a federal uniform lemon law that applies across the states to protect consumers in their purchase of new
cars.
a. True
b. False
34. The FTC policy statement addressing the meaning of unfairness provides that an injury is unfair if it is:
a. likely to mislead the consumer.
b. substantial and not outweighed by any benefits to consumers or competition.
c. one that the seller could reasonably have avoided.
d. All of these.
35. Discrimination based on in the extension of credit is prohibited under the Equal Credit Opportunity Act.
a. sex or marital status
b. religion or national origin
c. race or age
d. All of these.
36. The is empowered to issue industry-wide safety standards for consumer products.
a. UCCC
b. RESPA
c. FCCPA
d. CPSC
37. Lemon laws are generally understood to be laws that:
a. apply to the safety of food additives for fruits and vegetables.
b. are federal legislation designed specifically to protect state consumers from fraudulent car manufacturers.
c. are state laws that attempt to provide new car purchasers with rights that are similar to full warranties under
the Magnuson-Moss Act.
d. are interstate compacts to uniformly deal with lemon cars.
38. Congress enacted the to provide consumers who purchase a home with greater and more timely information
on the nature and costs of the settlement process.
a. RESPA
b. CPSC c.
OSHA d.
FCCPA
39. Under Truth-in-Lending, the cost of consumer credit must be expressed in an:
a. appreciated payment rate.
b. annual percentage rate.
c. appraisal payment ratio.
d. allocated procedures remedy.
40. Which of the following would NOT be considered to be an example of open-ended credit?
a. A gasoline credit card account
b. A VISA account
c. A real estate mortgage account
d. A department store credit card account
41. The Magnuson-Moss Warranty Act provides that:
a. a full warranty cannot disclaim any implied warranty.
b. a limited warranty can disclaim any implied warranty.
c. a full warranty cannot disclaim, but may modify or limit an implied warranty.
d. a limited warranty cannot limit the duration of any implied warranty
42. The Fair Debt Collection Practices Act prohibits:
a. communication with a debtor who is represented by an attorney.
b. calls after 6 p.m.
c. contacting third persons to find out the whereabouts of a debtor.
d. a creditor from calling a debtor regarding payment of a bill.
43. Which of the following is not true about the Home Mortgage Disclosure Act?
a. It was enacted to emphasize to financial institutions the importance of their reinvesting funds in the
communities they serve.
b. It was enacted to put redlining into effect.
c. It outlawed geographic discrimination.
d. It requires public disclosure of the financial institution’s geographic pattern of mortgage lending.
44. The mandates clear disclosure of relevant credit information in consumer credit transactions. It requires
conspicuous disclosure of finance charges and interest rates calculated in a uniform manner.
a. Equal Credit Opportunity Act
b. Fair Credit Billing Act
c. Truth-in-Lending Act
d. FTC Act
45. Under state law in many states and under the FTC rules and the federal Consumer Credit Protection Act, a contract
solicited in a consumer's home may be canceled:
a. within 10 days by either party.
b. within 10 days by the consumer.
c. within three days by the consumer.
d. within 20 days by either party.
