Business Law Chapter 18 Questions

ECNAL Corp. manufactures bicycle parts. One of its new products, the Slipstream tire, is advertised to be 20 percent stronger than that of its competitors due to a new rubber compound used that makes the tires skid resistant. After receiving complaints of fraud, the Federal Trade Commission (FTC) determines that the tire is made from rubber similar to that found in most bicycle tires and is not skid resistant. The FTC orders ECNAL to run an ad admitting that its advertisements were misleading and remove the untrue information from its advertisements. In this scenario, which of the following remedies is used by the FTC? A. corrective advertising B. cease and desist advertising C. comparative advertising D. parody advertising E. social advertising

A

The Bureau of Consumer Protection may allege that an individual or company has violated Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices. The alleged individual or company is called a(n) ______. A. respondent B. claimant C. appellant D. plaintiff E. pursuer

A

The basic penalty for trade practice violations under the Federal Trade Commission Act is a civil fine of not more than ______. A. $16,000 per violation B. $36,000 per violation C. $90,000 per violation D. $200,000 per violation E. $500,000 per violation

A

Which of the following acts establishes procedures that banks and other financial institutions must follow when consumers dispute amounts billed by a bank? A. the Electronic Fund Transfer Act B. the Fair Credit Reporting Act C. the Magnuson-Moss Warranty Act D. the Federal Trade Commission Act E. the Equal Credit Opportunity Act

A

Which of the following statements is most likely to be true when the Federal Trade Commission (FTC) is very laissez-faire? A. The FTC does not regulate most advertising. B. The FTC tends not to regulate traditional frauds. C. The FTC commissioners tend to be more consumer-oriented. D. The FTC will increase the number of deceptive cases filed. E. The FTC limits the role of markets in regulating advertising.

A

In a bankruptcy proceeding, which of the following classes of bankruptcy creditors will receive highest priority? A. government tax claims B. employees who are owed wages earned within 180 days of the bankruptcy petition C. consumers who have paid deposits or prepayments for undelivered goods or services D. spouse, former spouse, child, or guardian with claims for domestic support E. general creditors

D

Subprime mortgages refer to mortgages securing loans for consumers A. at an interest rate lower than the prime interest rate established by the Federal Reserve Bank. B. who own property that cannot pass a reasonable safety inspection. C. with excellent credit worthiness at a lower than ordinary market rate. D. who do not qualify for ordinary market rates due to a lack of credit worthiness. E. with excellent credit worthiness at a zero rate of interest.

D

The creditors who file an involuntary petition to the court to begin a bankruptcy proceeding must be owed at least ______ by the debtor. A. $1,200 B. $1,500 C. $2,500 D. $2,300 E. $1,000

D

To obtain civil fines, either the Federal Trade Commission (FTC) or the Justice Department must ask the federal court to assess them. The exception to this rule is when companies A. violate a cease and desist order. B. agree to fines as part of a cease and desist order. C. knowingly violate a prior FTC order against others. D. violate a trade regulation rule. E. agree to fines as part of a consent order.

E

Which of the following act's purpose is to prevent discrimination in credit extension? A. the Federal Trade Commission Act B. the Fair Credit Reporting Act C. the Truth-in-Lending Act D. the Fair Debt Collection Practices Act E. the Equal Credit Opportunity Act

E

Which of the following acts requires the government to issue model disclosure forms? A. Equal Credit Opportunity Act B. Stored Communications Act C. Electronic Communications Privacy Act D. Federal Trade Commission Act E. Truth-in-Lending Simplification Act

E

Which of the following statements is true of the Truth-in-Lending Simplification Act? A. It restricts statutory penalties to failures to disclose credit terms that are of material importance in credit comparisons. B. It requires statutory penalties to be based purely on technical violations of the act. C. It eliminates the need for model disclosure forms issued by the government. D. It restricts state laws from allowing private lawsuits against deceptive advertisements. E. It prohibits companies from the practice of redlining.

A

Shauna defaults on her car loan payment. The debt collector hired by the bank visits Shauna and verbally abuses her using offensive language. In this scenario, which of the following statements is true under the Fair Debt Collection Practices Act (FDPCA)? A. The court cannot order the debt collector to pay Shauna any money as she has suffered no physical injury. B. The court can order the debt collector to pay up to $1,000 for using obscene language. C. The court can order the debt collector to pay up to $10,000 for having made a house visit. D. The debt collector is not liable to Shauna, but the bank that hired the collector is liable to her. E. The debt collector did not violate the FDPCA because the use of intimidation tactics by debt collectors for habitual offenders is legal.

B

The ______ requires that a lender disclose the finance charge, expressing it as an annual percentage rate, and specifies the methods for making this computation. A. Equal Credit Opportunity Act B. Truth-in-Lending Act C. Fair Credit Reporting Act D. Magnuson-Moss Warranty Act E. Fair Debt Collection Practices Act

B

The familiar telemarketing sales rule that established the national "Do Not Call" list is an example of a(n) ______. A. Congressional statute B. trade regulation rule C. executive order of the president D. Uniform Commercial Code rule E. procedural law

B

The Equal Credit Opportunity Act is aimed especially at preventing ______. A. race discrimination B. age discrimination C. sex discrimination D. marital status discrimination E. religion discrimination

C

The Magnuson-Moss Warranty Act, administered by the Federal Trade Commission, applies to all product warranties on consumer products costing more than ______. A. $100 B. $10 C. $15 D. $25 E. $50

C

The Truth-in-Lending Act gives debtors the right to rescind certain transactions for a period of ______ business days from the date of the transactions or from the date they are given the notice of their right to rescind, whichever is later. A. seven B. eight C. three D. nine E. five

C

In a bankruptcy proceeding, which of the following classes of bankruptcy creditors will receive the lowest priority? A. one who is injured from a motor vehicle operated by a debtor while he was intoxicated B. employees who are owed wages earned within 180 days of the bankruptcy petition C. consumers who have paid deposits or prepayments for undelivered goods or services D. creditors with claims that occur in the ordinary course of the debtor's business after a bankruptcy petition has been filed E. creditors with claims that arise from the costs of preserving and administering the debtor's estate

A

In the context of false advertising laws, state law A. may allow for private lawsuits in addition to government enforcement, which is an option not available under the Federal Trade Commission Act. B. ignores material claims in deceptive advertising unlike the Federal Trade Commission Act. C. ignores express claims made in deceptive advertising unlike the Federal Trade Commission Act. D. only prosecutes violators who make implied claims in their advertising unlike the Federal Trade Commission Act. E. uses remedies such as corrective advertising to accompany some of its orders, which is an option not available under the Federal Trade Commission Act.

A

DrakeAuto Corp. is an automobile dealer that offers flexible payment plans for its customers. However, DrakeAuto requires its customers over 60 years of age to make the payment in full. In this case, DrakeAuto violates the ______. A. Federal Trade Commission Act B. Equal Credit Opportunity Act C. Truth-in-Lending Act D. Fair Debt Collection Practices Act E. Fair Credit Reporting Act

B

Infro Inc. is a major lender. It plans to include the zip codes of its customers as a major factor when offering loans. This allows Infro to reduce the amount of risk it takes by not providing loans in certain areas where property values are low. In this case, which of the following statements is true? A. Before Infro implements its decision, it must obtain permission from the Federal Trade Commission to do so. B. If Infro goes through with its decision, it is engaging in redlining. C. The decision of Infro is legal under the provisions of the Equal Credit Opportunity Act. D. Before Infro implements its decision, it must specify the minimum average property value a person must have before applying for a loan. E. If Infro goes through with its decision, it is engaging in inclusionary zoning which is legal.

B

The regulatory center for federal consumer protection is the ______. A. United States Consumer Product Safety Commission B. Bureau of Consumer Protection C. Federal Consumer Protection Agency D. Bureau of Consumer Trade E. Department of Consumer Affairs

B

To determine deception in advertising, the Federal Trade Commission A. looks at an ad from the point of view of a reasonable seller. B. looks at both implied and express claims. C. ignores what an ad does not say. D. looks at an ad from the point of view of a reasonable advertiser. E. ignores the pictures but focuses on certain words and phrases.

B

BrightCave is a local retail store that regularly extends credit to its customers. William, an African American, is denied credit by the store. He believes that the store has discriminated against him based on his race. In this scenario, BrightCave violates the ______. A. Federal Trade Commission Act B. Fair Credit Reporting Act C. Equal Credit Opportunity Act D. Fair Debt Collection Practices Act E. Truth-in-Lending Act

C

For violations of the Fair Debt Collection Practices Act, in the absence of actual damages, the court may still order a collector to pay a debtor up to ______. A. $100,000 B. $50,000 C. $1,000 D. $5,000 E. $10,000

C

Private remedies for violation of the Equal Credit Opportunity Act include recovery of punitive damages up to ______. A. $100,000 B. $50,000 C. $10,000 D. $20,000 E. $500,000

C

DN Corp. is a credit reporting agency. DN Corp. furnishes an investigative consumer report about Nicole, a candidate, who is seeking employment at Zenith Corp., a financial institution. Nicole is given a week's notice that such a report will be generated by DN Corp. as part of Zenith's hiring process. DN Corp. follows reasonable procedure when collecting information about Nicole. However, Nicole realizes that the report contains false information about her. In this scenario, which of the following is most likely to be true? A. Nicole can sue DN Corp. for furnishing false information as it violates the Fair Credit Reporting Act. B. Nicole can sue Zenith Corp. for requesting an investigative consumer report. C. Nicole cannot file a libel action against DN Corp. for furnishing false information regardless of whether the investigative procedures were reasonable or not. D. DN Corp. is not liable to Nicole as it followed reasonable procedures. E. DN Corp. is protected by the Fair Credit Reporting Act against any liability regardless of whether the investigative procedures were reasonable or not.

D

Which of the following types of debts are nondischargeable in bankruptcy? A. negligence claims B. personal loans from friends C. liabilities under guaranty agreements D. business debts E. debts arising from intentional torts

E

______ ensures fair competition by preventing those who would deceive consumers from diverting trade from those who compete honestly. A. trade practice regulation B. redlining procedure C. resale price maintenance D. restraint of trade E. full-line forcing

A

The Electronic Fund Transfer Act, administered by the Consumer Financial Protection Bureau, limits liability on lost, stolen, or misused automatic teller and check cards (debit cards) to A. $600 if reported after two days but before 60 days of consumer's learning of a misuse. B. amounts over $15 within the consumer's home state if reported within seven business days. C. $50 if reported within two business days of consumer's learning of a misuse. D. $15 within a 100-mile radius of a consumer's home if reported within seven business days. E. $500 after 60 days without reporting.

C

If there are violations of the Equal Credit Opportunity Act (ECOA), affected consumers A. have the right to file a petition to the president to seek some form of remedy. B. can recover punitive damages only in the presence of actual damages. C. can recover punitive damages up to $100,000. D. have the right to seek public enforcement by the Federal Trade Commission. E. have to depend on the government to ensure they have equal opportunities for credit as they cannot pursue private remedies.

D

Among the costs frequently paid by debtors to creditors as a condition of the extension of credit, which of the following are included in the finance charge? A. title insurance fees B. abstract fees C. attorney's fees for preparing deeds D. notary fees E. fees for appraisals

E

Big Prime Inc. is a leading investment bank. Big Prime lends money to more men than women as it believes men are more likely to pay back their loans. In this case, Big Prime violates the ______. A. Federal Trade Commission Act B. Fair Credit Reporting Act C. Truth-in-Lending Act D. Fair Debt Collection Practices Act E. Equal Credit Opportunity Act

E

Under the Fair Credit Reporting Act (FCRA), investigative consumer reports detailing a consumer's character, general reputation, and mode of living A. may be obtained without any restriction should the consumer apply for a credit, an insurance, an accounting, or a finance-related job. B. may be obtained by no one unless at least three days' advance notice is given to the consumer that such a report will be sought. C. can be sought only with the permission of the Federal Trade Commission. D. are prohibited because they are not credit-related issues. E. are prohibited because they violate the right to privacy of the consumer.

B

The ______ provision of the Fair Credit Reporting Act requires that consumers who are seeking credit for personal, family, or household purposes be informed if their application is denied because of an adverse credit report. A. server B. subscriber C. access D. content E. user

E

Which of the following statements is true of the penalties and remedies under the Truth-in-Lending Act? A. There are no criminal penalties for violation of the Truth-in-Lending Act. B. The criminal liability provisions make creditors liable to debtors for an amount equal to thrice the finance charge. C. The civil liability provisions may allow creditors to be liable to debtors for an amount neither less than $4,000 nor more than $40,000 for a closed-end real estate transaction. D. Creditors may avoid liability in the event they make an error, provided they notify a debtor within sixty days after discovering the error and also correct the error. E. Creditors, in certain cases, may be allowed to collect finance charges in excess of those actually disclosed.

D

Most cases brought by the Bureau of Consumer Protection are settled using ______. A. the cease and desist order B. arbitration C. extradition D. an injunction E. the consent-order procedure

E

Section 5 of the ______ prohibits unfair or deceptive acts or business practices. A. Equal Credit Opportunity Act B. Fair Credit Reporting Act C. Truth-in-Lending Act D. Fair Debt Collection Practices Act E. Federal Trade Commission Act

E

The Consumer Financial Protection Bureau's authority applies to A. businesses regulated by the Securities and Exchange Commission. B. Internet service providers. C. persons regulated by the Securities and Exchange Commission. D. insurance companies. E. banks that extend credit loans.

E

The Fair Credit Reporting Act applies to anyone who prepares or uses a credit report in connection with A. opening a bank account. B. promoting an employee. C. selling real estate. D. granting a business license. E. extending credit.

E

The ______ is the sum of all charges payable directly or indirectly by the debtor or someone else to the creditor as a condition of the extension of credit. A. annual percentage rate B. funding charge rate C. commercial charge D. service charge E. finance charge

E

Which of the following statements is true of redlining? A. It refers to the practice in which real estate brokers guide prospective home buyers toward or away from certain neighborhoods based on their race. B. It refers to the perceived business practice of a company providing a product or a service based on the customer lifetime value. C. It refers to a way of encouraging white owners of property to sell their houses at a loss by implying that racial minorities were moving into their previously racially segregated neighborhood, thus depressing real estate property values. D. It refers to an organization targeting its minority consumers by charging them more for services or products when compared to the charges for its non-minority consumers. E. It refers to the refusal of an organization to make loans at all in certain areas where property values are low.

E

Which of the following statements is true of the Fair Debt Collection Practices Act? A. It permits debt collectors to contact a third party, even if an attorney representing a debtor responds to all communications by the collector. B. It permits debt collectors to contact third parties; the collectors must disclose that they are pursuing a debt against a consumer but may not disclose the nature or amount of the debt. C. It permits debt collectors to contact third parties; the collectors must disclose that they are pursuing a debt against a consumer and may also disclose the nature or amount of the debt. D. It forbids debt collectors from contacting third parties regardless of the disclosure or nondisclosure of the existence of a consumer's debt. E. It permits debt collectors to contact third parties, but the debt collector may not state that the consumer owes a debt.

E

Which of the following statements is true of the Federal Trade Commission's (FTC's) penalties or remedies? A. The basic penalty for trade practice violations under the FTC Act is a civil fine of not more than $1,000 per violation. B. The FTC's main purpose is to find violators and punish them. C. Either the FTC or the Justice Department must ask the federal court to assess all civil fines including fines accepted by companies that are imposed as part of a consent order. D. Civil fines may be assessed by courts only under two distinct situations: for a violation of a consent or cease and desist order or for a violation of a trade regulation rule. E. The FTC Act states that in the case of a violation through continuing failure to obey an order, each day the violation continues is a separate offense.

E

Which of the following statements is true of the limitation of the Fair Credit Reporting Act? A. If a bank passes along any information it received from an outside source about its customer, then its credit report is not covered by the act. B. If a bank reports only as to its own experiences, it would come under the act. C. If a bank furnishes information about a customer related to its transactions, it would come under the act. D. If a bank passes on information it collected from credit reporting agencies that used several sources, it would not come under the act. E. If a bank gave its opinion as to the creditworthiness of a customer in question, it would come under the act.

E

______ are reports on a consumer's character, general reputation, mode of living, and so on, obtained by personal interviews in the consumer's community. A. Credit reports B. Consumer policy reports C. Market research reports on consumers D. Arbitrative consumer relations reports E. Investigative consumer reports

E

______, usually one of the first actions of a debt collector to locate a debtor, may require that the collector contact third parties who know of the debtor's whereabouts. A. Predatory conduct B. Judicial restraint C. Prior restraint D. Redlining E. Skip-tracing

E