Ch. 39

The issue in the POM Wonderful, LLC v. FTC case involved

the type of evidence necessary to support health claims in advertisements.

An employer cannot request a consumer report on a potential employee without that person's permission.

True

Consumers may keep as a gift any unordered merchandise that they receive in the mail.

True

In 30-year mortgages, the finance charge typically exceeds the amount of the principal.

True

Section 5 of the Federal Trade Commission Act (FTC Act) prohibits unfair and deceptive acts or practices.

True

Consumers have a right to

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

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

All of these are correct.

A door-to-door salesperson knocks on Mary's door and convinces her to purchase the Wonder Vacuum for $500. Soon after the salesperson leaves, Mary begins to have second thoughts about the transaction. Which statement about the situation is correct?

Mary can cancel the transaction at any time before midnight of the third business day thereafter.

Under the Fair Debt Collection Practices Act, a collection company is legally permitted to

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

Under FTC rules, when a customer legally cancels a door-to-door sales contract, the seller must return the buyer's money within

10 days

The Fun Tyme Toy Company discovers that one of its products can easily break, exposing children to potential injury from the sharp parts. Under the Consumer Product Safety Act of 1972, in how long does Fun Tyme have to report this defect to the Consumer Product Safety Commission?

24 hours

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.

60 days

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

All of these are correct.

Suppose Bill's credit card is stolen and he notifies 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?

Bill is responsible for the first $50 of unauthorized charges.

Chase received a magazine in the mail that he did not order. He was surprised, but read and enjoyed the magazine. A month later, another copy arrived, along with a bill for $25 to cover the subscription. Which of the following applies to this situation?

Chase does not have to pay for the magazine, even if the company continues to send it to him.

Which of the following is a provision of the CARD Act?

Credit card bills must be mailed at least 21 days ahead of their due dates.

"Bait-and-switch" tactics are not a violation of FTC rules if the merchant does not have enough stock on hand to meet reasonable demand for the advertised product.

False

Electronic payments via a telephone, computer, or wire transfers are not regulated by the government.

False

If UTB—a mortgage company—violates any provision of TILA, their consumers have the right to rescind the mortgage for up to six business days after the signing.

False

The Consumer Financial Protection Bureau (CFPB) was created to represent consumers by filing suit in a federal court, for the purpose of asking for damages on behalf of the injured consumer.

False

The Equal Credit Opportunity Act makes it illegal for a lender to discriminate against a potential borrower because of race, national origin, religion, or sex, but it is permissible to treat a borrower differently if he or she is on welfare.

False

The Federal Trade Commission Act considers the terms "deceptive" and "unfair" to be synonymous when determining what practices should be prohibited.

False

The Magnuson-Moss Warranty Act requires manufacturers to provide a warranty on their products regardless of cost.

False

The Truth in Lending Act regulates interest rates or the terms of a loan.

False

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?

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

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?

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?

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

The FTC may consider an act unfair if it simply violates public policy.

True

The Telephone Consumer Protection Act (TCPA) prohibits telemarketers from making autodialed and/or prerecorded calls or texts to cell phones, and prerecorded calls to residential land lines unless the consumer unambiguously consents in writing.

True

Under §5 of the FTC Act, anyone who receives unordered merchandise in the mail may treat it as a gift.

True

Under the Fair and Accurate Credit Transactions Act (FACTA),

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

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

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

children's toys.

The Fair Debt Collection Practices Act prohibits which of the following practices by a debt collector?

falsely representing himself as a lawyer.

Under the TILA, a qualified mortgage (QM)

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

The maximum rate of interest for credit transactions is established by

state law

Under the Truth in Lending Act, a lender must disclose all of the following EXCEPT

the average percentage rate charged by competitors.

With regard to mortgages, the Consumer Finance Protection Bureau (CFPB) requires mortgage servicers

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

Which of the following statements expresses the purpose of the Truth-in-Lending Act?

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