Chapter 24a All statutes that serve to protect the interests of consumers are classified

Document Type
Test Prep
Book Title
The Legal Environment of Business: Text and Cases: Ethical-- Regulatory-- Global-- and Corporate Issues 8th Edition
Authors
Frank B. Cross, Roger LeRoy Miller
1. All statutes that serve to protect the interests of consumers are
classified as consumer law.
1. Federal laws often provide more sweeping and significant protections
for the consumer than state laws.
1. Vague generalities and obvious exaggerations constitute deceptive
advertising.
1. Ads cannot be unfair.
1. 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.
1. A sanction known as counteradvertising requires a company to
advertise the products of its competitor to counter its own false claims.
1. Labels must use words that are easily understood by the ordinary
marketing executive.
1. Food products are not required to bear labels detailing the nutritional
content.
1. Labels on fresh meat must indicate where the food originated.
1. Buyers of goods sold door to door can cancel their contracts within
three business days.
1. The key federal statute regulating the credit and credit-card industries is
basically a disclosure law.
1. Merchants must ship orders within the time promised in their ads.
1. Credit can be denied solely on the basis of marital status.
1. A credit-cardholder is liable for all unauthorized charges made before
the creditor is notified that the card has been lost.
1. Major credit reporting agencies must provide consumers with free
copies of their own credit reports every twelve months.
1. Creditors attempting to collect debts are generally considered to be
debt-collection agencies.
1. A collection agency must include a validation notice whenever it initially
contacts a debtor for payment of a debt.
1. A creditor has the right to garnish a debtor’s wages unless the debt
has gone unpaid for a prolonged period.
1. Drugs can be marketed to the public before they are ensured to be
safe and effective.
1. Manufacturers are required to report on any products already sold if
the products have proved to be hazardous.
1. 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.
1. Home Brand Products, Inc., in its ads, makes claims about its products
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.
1. Quackity Quack Company’s ad states that its product is “the best on
the market today.” Because of this ad, the Federal Trade Commission
is most likely to
a. do nothing.
b. draft a formal complaint.
c. issue a cease-and-desist order.
d. require counteradvertising.
1. 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.
1. 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.
1. 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.
1. 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.
1. 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.
1. 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.
1. Sweet Treats, Inc., wants to market a new snack food. On the prod-
uct’s label, standard nutrition facts are
a. prohibited.
b. required.
c. strictly voluntary.
d. warranted by the nature of the food.
1. 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.
1. 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.
1. 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.
1. 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 subject 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.
1. 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.
1. 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.
1. 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.
1. 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.
1. Green Grocer 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.
1. 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.
1. Darren wants to go into the business of direct merchandise sales. What
are the legal problems that Darren might encounter in telemarketing? In
selling door-to-door? In marketing over the Internet? In soliciting sales
through the mail?
1. 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?
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