Although increased consumer protections were approved this summer, U.S. PIRG warned parents that those rules have not yet gone into effect.
"Unfortunately, while the product safety bill is a major step forward, many of its protections are not yet fully in effect, so it's still buyer beware this year," said Elizabeth Hitchcock, public health advocate for U.S. PIRG.
In its 23rd annual "Trouble in Toyland" report on hazardous playthings, the organization focused on three hazards: small parts that can choke children who are younger than 3-years-old, lead-tainted toys and soft plastic toys that contain chemicals called phthalates.
Hitchcock said the tube at the center of a toilet paper roll is perfect for testing whether a toy is small enough to pose a choking risk. If a toy, or a piece of a toy, fits into the cylinder, it is too small for children under three, Hitchcock said.
In terms of lead-contamination, Ed Mierzwinski, U.S. PIRG's consumer program director, said parents should absolutely avoid children's metal jewelry.
"Any heavy, cheap jewelry - costume jewelry, kids jewelry - has probably got lead in it," Mierzwinski said.
He said the risks from lead-contaminated paint are lower, because the percentage of lead is usually small.
Lead poisoning can cause irreversible learning disabilities, behavioral problems and, at very high levels, seizures, coma and death.
Of the seven toys U.S. PIRG tested for lead, three were contaminated.
Phthalates are a big concern for the organization this year. These chemicals are widely used to make plastic products softer and can cause health problems.
The consumer-safety legislation President Bush signed in August set a standard for plastics containing phthalates. But the Consumer Product Safety Commission says manufacturers can keep selling phthalate-containing toys until the current stock runs out, because the law does not apply retroactively.
"Products containing phthalates are still out there for sale this holiday season," she said.
She added that since lab testing is the only way to know if a toy contains phthalates, parents should just avoid soft plastic toys this year.
"The agency fully enforces the laws that protect children, and we will continue to do that," said CPSC spokeswoman Julie Vallese. "When it comes to safety, the CPSC does not look for loopholes."
She added that there is "conflicting information" in terms of scientific data on the danger of phthalates.
Of the 14 plastic toys U.S. PIRG tested, two contained phthalates.
The Toy Industry Association responded with a statement saying parents should not be "needlessly" frightened by the report.
"The toy industry works continuously to strengthen our rigorous testing and inspection procedures and ensure safe toys," the trade group's statement said. "Protecting children will always be our highest priority."