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Exam 41: Consumer Law

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Question 1

Multiple Choice

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Credit Loan Company extends credit in the ordinary course of its business. Under the Truth-in-Lending Act, Credit Loan must inform potential borrowers of

A) credit terms offered by other lenders.
B) comparative prices for goods to be bought with the borrowed funds.
C) Credit Loan's credit terms.
D) the borrowers' credit scores.

E) B) and C)
F) A) and B)

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Question 2

Multiple Choice

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Leo's application to Metro Bank for a credit card is denied on the basis of what Leo believes is an inaccurate credit report. Leo should

A) immediately apply for a credit card with a different financial institution.
B) appeal the denial to the appropriate federal or state agency.
C) obtain his credit report and notify the reporting agency of inaccuracies.
D) file a suit against the bank, alleging a violation of federal credit laws.

E) None of the above
F) A) and C)

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Question 3

Multiple Choice

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Credit Agency Corporation issues consumer credit reports. The company generally does not delete unverifiable or erroneous information from the reports. Under the Fair Credit Reporting Act, this firm may be subject to

A business that cannot provide scientific evidence to support its marketing claims may be held liable for deceptive advertising.

Direct Sales Corporation sells products to consumers over the phone, through the mail, and online. Under the Federal Trade Commission's Mail or Telephone Order Merchandise Rule, the firm may be liable for failing to

An ad for Bagels Inc. attracts buyers who would otherwise have made purchases from Croissant Company. To bring a successful claim against Bagels under the federal Lanham Act for false advertising, Croissant must establish that

A false statement or unjustified claim about a competitor's products can result in liability for deceptive advertising.

Regulation Z was issued by the Federal Reserve Board of Governors to implement the disclosure requirements of the Truth-in-Lending Act.

Mattress Company advertises a special sale-all bedding, half price. The ad does not state that the sale price does not include delivery or shipping costs. To avoid claims of deceptive advertising, Mattress should

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

Consumer Finance Corporation (CFC) extends credit to consumers. CFC applies several criteria to decide customers' "suitability" for credit. Under the Equal Credit Opportunity Act, CFC cannot base its decision on a customer's

Bait-and-switch advertising occurs if the seller fails to have reasonably adequate quantities of the advertised item available.

The government cannot remove a product from the market simply because it is considered imminently hazardous.

The quality and safety of food may be important to consumers, but food labels that provide standard nutrition facts are a seller's option, not a requirement.

ChemCo Inc. makes and sells products containing ingredients potentially hazardous to consumers. The government agency that has the authority to order ChemCo to remove a product from the market is

The manufacture and sale of any product that poses an unreasonable risk to consumers can be banned.

Half-truths-information that is true but incomplete-are not deceptive because such statements are at least half true.

Auto & Life Insurance Company fails to notify its new customers when they are charged higher premium rates as a result of their credit scores. This is a willful violation of

Owen buys a restored 1969 Dodge Charger from Prime Restorations Inc. on credit but makes no payments on the account. Quentin, the owner of Prime Restorations, calls Owen at home on a Monday morning at three A.M. Quentin represents himself as RiteNow Collection Agency and demands payment "or else." The next day, Quentin sends Owen 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, Quentin will arrange for the "destruction of Owen's good credit rating." Which laws has Quentin violated, if any, and in what ways?

If an advertisement is proven to be deceptive, it may be subject to a cease-and-desist order.