Business Law Chapter 26

The Fair Debt Collection Practices Act prohibits which of the following practices? a. A debt collector falsely representing himself as a lawyer b. A debt collector telephoning the debtor at 8:00 a.m. c. Visiting a debtor at work if the employer permits personal visits d. Using neighbors to locate the debtor

a. A debt collector falsely representing himself as a lawyer

Don received in the mail merchandise he never ordered. The package was addressed to him, and when he opened it he saw a brochure stating he could keep the products for only $19.95. If he chose not to keep the products he was instructed to mail them back within five days. Which of the following is correct? a. Don can keep and use the merchandise without having to pay for it. b. Don can keep the merchandise only if he pays the $19.95 charge. c. Don must send the merchandise back within five days if he does not want it. d. Don must return the merchandise within 30 days if he does not want it.

a. Don can keep and use the merchandise without having to pay for it.

The maximum rate of interest for credit transactions is established by a. state law. b. federal law. c. the Federal Reserve Board. d. the FTC.

a. state law.

Under the Truth In Lending Act, a lender must disclose all of the following EXCEPT a. the average percentage rate charged by competitors. b. the amount financed. c. the annual percentage rate (APR). d. the finance charge.

a. the average percentage rate charged by competitors.

Under FTC rules, a customer can cancel a door-to-door sales contract within a. three business days of the sale. b. five business days of the sale. c. one calendar week from the date the sale was made. d. a "reasonable time" after the sale was made.

a. three business days of the sale.

With regard to mortgages, the Consumer Finance Protection Bureau (CFPB) requires mortgage servicers a. to contact borrowers who are 36 days late in making a payment. b. to wait 180 days after nonpayment before beginning foreclosure. c. to credit payments within 3 days after they are received. d. to extend delinquent borrowers additional time to repay the loan.

a. to contact borrowers who are 36 days late in making a payment.

If a consumer cancels a door-to-door sale within the required time, how many days does the seller have to return the buyer's money? a. 3 b. 10 c. 21 d. 30

b. 10

Suppose Bill's credit card is stolen and he notified his credit card company of this fact. Which of the following is true regarding the amount of unauthorized charges made before Bill notified his credit card company? a. Bill is not responsible for any of the unathorized charges. b. Bill is responsible for the first $50 of unathorized charges. c. Bill is responsible for the first $100 of unauthorized charges. d. Bill is responsible for half of the unauthorized charges.

b. Bill is responsible for the first $50 of unathorized charges.

Mabel is a single 40-year-old who has borrowed money on numerous occasions. Her payment record has been good, except she has been delinquent in paying a few bills. Which of the following is true regarding credit information gathered on Mabel? a. Since Mabel has been delinquent, she waives her right to see the credit files. b. If Mabel is rejected for a loan because of the consumer report, the lender must tell her the source of the report. c. Mabel has a right to have the information regarding her delinquency in paying a few loans stricken from her credit record because her record has generally been good. d. Mabel's only legal remedy, if there is erroneous information in her credit file, is to report the problem to the FTC for enforcement.

b. If Mabel is rejected for a loan because of the consumer report, the lender must tell her the source of the report.

In 1969, the federal government estimated that consumer products caused 30,000 deaths, 110,000 disabling injuries and 20 million trips to the doctor. The product category causing the majority of harm was a. automobiles. b. children's toys. c. power tools. d. food products.

b. children's toys.

Under the TILA, a qualified mortgage (QM) a. limits up-front points and fees to 5 percent. b. limits all of a borrower's debt to 43 percent of his or her income. c. allows balloon payments only if the borrower agrees up front. d. must allow for negative amortization.

b. limits all of a borrower's debt to 43 percent of his or her income.

The issue in the Kruser v. Bank of America case involved a. lost credit cards. b. unauthorized withdrawls. c. unfair interest rates. d. privacy.

b. unauthorized withdrawls.

Sandy noticed an unauthorized electronic funds withdrawal on her bank statement. In order for her to not be liable for the withdrawal, she must notify her bank within _______ of the date of the bank statement. a. 10 days b. 30 days c. 60 days d. 90 days

c. 60 days

John loans George money and they sign a written agreement whereby George will repay John in monthly installments. Is this loan subject to the Truth-in-Lending Act? a. Yes, if the loan is for more than $1,000. b. Yes, if John and George live in different states. c. No, if John is not in the business of offering credit. d. No, if John and George are related.

c. No, if John is not in the business of offering credit.

For the FTC to consider a practice to be unfair, it must meet a three-part test. Which of the following is NOT one of those tests? a. The practice causes a substantial consumer injury. b. The harm of the injury outweighs any countervailing benefit. c. The consumer had no reasonable way to recoup lost funds from the injury. d. The consumer could not reasonably avoid the injury. ANSWER: c

c. The consumer had no reasonable way to recoup lost funds from the injury.

Which of the following statements express the purpose of the Truth-in-Lending Act? a. To require lenders to charge a "reasonable" rate of interest b. To regulate interest rates and terms of loans c. To provide consumers with information necessary to make the best credit decision d. To help lenders limit state laws

c. To provide consumers with information necessary to make the best credit decision

Consumers have a right to a. exclude as obsolete information about a bankruptcy discharge seven years previously. b. know the name of anyone to whom credit information has been supplied by a consumer reporting agency within the last three years. c. have their own version of a disputed credit situation included in their credit file. d. have investigative reports become obsolete after 1 year.

c. have their own version of a disputed credit situation included in their credit file.

Millie ordered clothes from a mail order catalog. No time was specified as to when the goods would be shipped. In such a case the FTC requires that the company must ship the goods to Millie a. within 3 business days after receiving the order. b. within 10 business days after receiving the order. c. within 30 days after receipt of the order. d. within a reasonable time and within time lines consistent with industry standards.

c. within 30 days after receipt of the order.

MoneyMaker Toy Company violated the safety standards set forth by the Consumer Product Safety Commission when it produced a toy gun that caused injury to hundreds of children. Because of MoneyMaker's actions a. the CPSC can impose civil penalties on the company. b. the CPSC can impose criminal penalties on the company. c. users can sue for damages, including attorney's fees, if MoneyMaker knew it was violating a consumer product safety rule when it produced the guns. d. All of the answers are correct.

d. All of the answers are correct.

Ron's Furnace Repair advertised it would inspect any homeowner's furnace for free. Janet had Ron's come to inspect her furnace. The servicewoman dismantled the entire furnace then refused to put it back together unless Janet paid her $250. The FTC considers such a practice to be a. an unfair practice. b. a deceptive practice. c. an act that violates public policy. d. All the above.

d. All the above.

Marla applies for and receives a three-year loan through Sharkey Lenders for $5,000 at 27% APR.If the loan agreement violates the applicable usury statute, Marla may be able to keep a. the interest that exceeds the usury limit. b. all of the interest on the loan. c. the interest and the $5,000. d. Any of the answer choices are possible, depending on where the loan was made.

d. Any of the answer choices are possible, depending on where the loan was made.

Under the Fair and Accurate Credit Transactions Act (FACTA), a. a creditor may not discriminate against a borrower on the basis of race, sex, religion, or age. b. a debt collector may not harass or abuse debtors. c. a credit card company must promptly investigate and respond to any consumer complaints about a credit card bill. d. a consumer has the right to obtain one free credit report every year from each of the three major reporting agencies.

d. a consumer has the right to obtain one free credit report every year from each of the three major reporting agencies.

"Bait and switch" is a. advertising a product for sale and then giving the customer a rain check. b. placing the store brand and the national brand side-by-side in a store to confuse customers. c. selling the store brand at a lower price than the national brand. d. advertising certain goods and then pressuring the customer to buy different, more expensive goods.

d. advertising certain goods and then pressuring the customer to buy different, more expensive goods.

Under the Fair Debt Collection Practices Act, a collection company is legally permitted to a. call the debtor at any time of the day. b. call acquaintances of the debtor to tell them that the consumer is in debt. c. call the debtor even if the debtor has requested in writing that he or she wishes no further contact. d. visit the debtor at work if the consumer's employer permits such contact.

d. visit the debtor at work if the consumer's employer permits such contact.