Chapter 24Practice Exam
Matching Questions
Match the following terms with their definitions:
(5)A.FCBA
(3)B.FDCPA
(1)E.TILA
1.Requires lenders to disclose the terms of a loan
3.Regulates debt collectors
5.Regulates disputes between consumers and their credit card companies
True/False Questions
Circle true or false:
1.TFIf a store advertises a product, it must have enough stock on hand to fill every order.
3.TFUnder usury laws, lenders are limited in the amount of interest they can charge.
5.TFA consumer reporting agency has the right to keep information in its files secret.
Multiple-Choice Questions
7.If you receive a product in the mail that you did not order:
(a)You must pay for it or return it.
(b)You must pay for it only if you use it.
(c)You must throw it away.
(d)It is a gift to you.
(e)You must pay for it but the company must reimburse you for postage.
9.Depending on state law, if a lender violates the usury laws, the borrower could possibly be allowed to keep:
I.The interest that exceeds the usury limit
II.All the interest
III.All of the loan and the interest
(a)I, II, and III
(b)Only I
(c)Only II
(d)Only III
(e)Neither I, II, nor III
Short-Answer Questions
11.Process cheese food slices must contain at least 51% natural cheese. Imitation cheese slices, by contrast, contain little or no natural cheese and consist primarily of water and vegetable oil. Kraft, Inc. makes Kraft Singles, which are individually wrapped process cheese food slices. When Kraft began losing market share to imitation slices that were advertised as both less expensive and equally nutritious as Singles, Kraft responded with a series of advertisements informing consumers that Kraft Singles cost more than imitation slices because they are made from five ounces of milk. Kraft does use five ounces of milk in making each Kraft Single, but 30% of the calcium contained in the milk is lost during processing. Imitation slices contain the same amount of calcium as Kraft Singles. Are the Kraft advertisements deceptive?
Answer: The court agreed with the FTC that Kraft’s ads were deceptive. Kraft, Inc. v. FTC, 970 F.2d 311, 1992 U.S. App. LEXIS 17575 (7th Cir. 1992).
13.When customers called the number provided (see ad on p. 406 of the text), New Rapids Carpet Center, Inc. sent salespeople to visit them at home to sell them carpet that was not as advertised—it was not continuous filament nylon pile broadloom, and the price was not $77. Has New Rapids violated a consumer law?
Answer: This practice was a bait and switch, in violation of the FTC Act. The company made an alluring offer that was too good to be true. It then tried to switch customers to a different product. In re New Rapids Carpet Center, Inc., 90 FTC 64, 1977 FTC LEXIS 148 (1977).
15.Advertisements for Listerine mouthwash claimed that it was as effective as flossing in preventing tooth plaque and gum disease. This statement was true, but only if the flossing was done incorrectly. In fact, many consumers do floss incorrectly. However, if flossing is done right, it is more effective against plaque and gum disease than Listerine. Is this advertisement deceptive? Does it violate §5 of the FTC Act?
Answer: The court held that this advertisement was deceptive and did violate §5. McNeil, Inc, v. Pfizer Inc. 351 F. Supp. 2d 226; 2005 U.S. Dist. LEXIS 184 (2005).