Question 1

Lucy takes out a student loan from Midtown Bank. When she fails to make the scheduled payments for six months, Midtown advises her of further ac?tion that it will take. This violates

Accepted Answer

Midtown Bank advising Lucy of further action after she fails to make payments does not violate any federal law. The Fair Debt Collection Practices Act applies to third-party debt collectors, not original creditors like banks. The other acts mentioned do not pertain to this situation.

Question 2

Spicy Salsa, Inc., complains to the Federal Trade Commission (FTC) about an ad broadcast by Tangy Taco Sauce Company, Spicy Salsa's competitor. The FTC investigates and concludes that the ad is deceptive. The FTC's next step is to

Accepted Answer

The FTC's next step after concluding that an ad is deceptive is to draft a formal complaint against the company responsible for the ad. This initiates the process to address the deceptive advertising.

Question 3

SmartPhone Company's ad states that its product is "The Best that Money Can Buy." Because of this ad, the Federal Trade Com?mission is most likely to issue

Accepted Answer

The statement "The Best that Money Can Buy" is considered puffery, which is a subjective claim and not likely to be challenged by the FTC as it is not a factual claim that can be proven true or false.

Question 4

The credit department of Discount Retail Stores Inc. calls Emmett at work about an overdue bill. Emmett's employer objects. Discount Retail's credit department continues to call Emmett at work. This is a viola?tion of

Accepted Answer

The Fair Debt Collection Practices Act prohibits debt collectors from contacting consumers at their place of work if the collector knows or has reason to know that the employer prohibits such communications. Emmett's employer has objected to the calls, so Discount Retail's credit department is in violation of the act.

Question 5

Cecilia borrows $20,000 from Debit & Credit Union to repair her home and to buy a car. She buys a laptop from eStuf Store in a transaction financed by the seller. If these parties are subject to the Truth-in-Lending Act, Regulation Z ap?plies to

Accepted Answer

Regulation Z of the Truth-in-Lending Act applies to all consumer credit transactions, including loans for cars, home repairs, and retail installment sales like the laptop purchase.

Question 6

In the ordinary course of business, Loan2Buy Corporation offers credit to Mai and other consumers and reports on the loans to credit agencies. To save time and money, Loan2Buy generally does not correct or update its reported information. This is most likely to result in

Accepted Answer

By not correcting or updating its reported information, Loan2Buy Corporation may be providing inaccurate information to credit agencies, which could harm the credit scores of its customers. This could result in legal actions against Loan2Buy, such as an assessment of damages for any harm caused by the inaccurate information.

Question 7

Debt & Loan Collection Agency calls Ethel several times a day, and some?times in the middle of the night, about an overdue bill that a Furniture4U store turned over to Debt & Loan for collection. This is a violation of

Accepted Answer

The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from contacting consumers at inconvenient times, including before 8 a.m. and after 9 p.m. Debt & Loan's behavior of calling Ethel several times a day and sometimes in the middle of the night is a clear violation of this law.

Question 8

Slow-Brew Coffee Company sells coffee and related beverages. The company's ad contends that ambitious businesspersons "Drink Us & Rise Up in the World!' " The Federal Trade Com?mission would consider this ad to be

Accepted Answer

The ad is likely considered puffery, which is a legal term for promotional statements that are subjective and not meant to be taken literally. Such statements are generally not considered deceptive by the FTC.

Question 9

Tory borrows $10,000 from USA National Bank to remodel a room in her home. This transaction is subject to

Accepted Answer

The Truth-in-Lending Act (TILA) requires lenders to disclose the terms of a loan, including the annual percentage rate (APR), finance charges, and total amount to be repaid over the life of the loan. As Tory is borrowing money from the bank, this transaction falls under TILA regulations.

Question 10

Grover signs an installment contract with Home Appliance Store to finance the purchase of new kitchen appliances-stove, refrigerator, dishwasher, microwave, and toasteroven-for $3,999. This transaction is sub?ject to

Accepted Answer

The Truth-in-Lending Act requires lenders to disclose the terms and costs of credit to the borrower, including the annual percentage rate (APR), finance charges, and total amount to be financed. This law applies to installment contracts like the one Grover signed with Home Appliance Store, so D is the correct choice.

Question 11

Grid Tool Company makes and sells tools. One of the tools is believed to be haz?ardous. The appropriate government agency may require Grid to

Accepted Answer

The best choice for Grid Tool Company is to remove the hazardous tool from the market as it is believed to cause harm or damage to the users. Instead of risking the safety of the customers and facing legal consequences, it is wise to comply with the government agency's request and withdraw the tool from the market. Exporting, increasing or reducing the price does not eliminate the hazard, and it may exacerbate the risk to consumers.

Question 12

Under federal law, the calorie content of the food on a menu must be posted by Organic Mix, LLC, if Organic Mix is

Accepted Answer

According to federal law, a restaurant chain with twenty or more locations is required to post the calorie content of the food on its menu. Therefore, Organic Mix, LLC would need to post calorie contents if it meets this criterion.

Question 13

Mouth & Gums, Inc. (CSI), engages in de?ceptive advertising when it markets its product Oral Rinse as able to kill germs over long periods of time. In an action against Mouth & Gums, the firm is ordered to stop its false advertis?ing of Oral Rinse and other products. This is

Accepted Answer

A multiple product order is issued when a company is required to stop false advertising for not just one, but multiple products.

Question 14

Through careless manufacturing practices, Metalworks Company makes and distributes unsafe products that are sold to Nabi and other consumers. This may be subject to sanctions under

Accepted Answer

Metalworks Company's negligence in manufacturing unsafe products is subject to federal and state laws regarding product liability and consumer protection. Both federal and state laws require manufacturers to take reasonable steps to ensure that their products are safe for consumers. Failure to comply with these laws can result in sanctions, including fines, recalls, and lawsuits. The principle of freedom to contract does not allow companies to manufacture and distribute unsafe products without consequences, as this would violate the rights of consumers to safety and protection.

Question 15

Nature's Food Market sells groceries. Metro Snacks & Drug Store sells groceries and fills prescriptions. The party with the chief responsibility to prevent unsafe food and drugs from being sold is

Accepted Answer

The party with the chief responsibility to prevent unsafe food and drugs from being sold is the Food and Drug Administration (FDA). While both Nature's Food Market and Metro Snacks & Drug Store have a responsibility to ensure the safety of the products they sell, the ultimate responsibility lies with the FDA. The Federal Trade Commission (FTC) oversees advertising and business practices, but does not have regulatory authority over food and drugs.

Question 16

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

Accepted Answer

Standard nutrition facts labeling is required by the FDA for most packaged foods, including snack foods, to provide consumers with important information about the food's nutritional content.

Question 17

Jasmine receives an unsolicited credit card in the mail and tosses it on her desk. Without Jasmine's permission, her roommate Ilene uses the card to buy a new tablet for $500. Jasmine is

Accepted Answer

Jasmine did not authorize the use of the credit card, so she is not liable for any charges made by Ilene. It is illegal for someone to use someone else's credit card without their permission. Jasmine should report the unauthorized use of the card to the credit card company immediately.

Question 18

Medi-Insurance Company faxes ads to Nancy and other individual consumers without the recipients' permission. This is subject to

Accepted Answer

The Federal Communications Commission (FCC) regulates unsolicited faxes under the Telephone Consumer Protection Act (TCPA), which can impose fines for such violations.

Question 19

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

Accepted Answer

The answer of Kip opens an account at a Lotsa...

Question 20

QuikPay Inc. extends credit to consumers. QuikPay is subject to the Equal Credit Opportunity Act, which prohibits credit dis?crimination based on

Accepted Answer

The Equal Credit Opportunity Act prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, or the fact that an applicant receives income from a public assistance program. Discrimination based on intelligence or education is not prohibited by the Act, and discrimination based solely on income is also not allowed, but income can be considered as a factor in determining creditworthiness.

Quiz 44: Consumer Law