A company that sells a product at a location other than its place of business or a finance company that purchases a contract for such sale should be aware of consumer cancellation rights under the Federal Trade Commission’s (FTC’s) Cooling-Off Rule and related state laws.
Under the FTC’s Cooling-Off Rule, a consumer has three days to cancel a sale that occurs outside the seller’s place of business. The definition of “outside the seller’s place of business” includes the obvious location of the consumer’s home. However, it goes beyond that to truly mean anywhere outside the seller’s place of business, including, for example, a consumer’s workplace or a temporary location used by a seller such as a convention center, fairground or restaurant.
In addition to the FTC’s rule, most states have developed similar laws that allow for cancellation of sales outside the seller’s place of business. In some instances those state laws provide for added protections, such as allowing senior citizens additional time for cancellation.
If the Cooling-Off Rule or related state law is applicable to a company’s sales transaction, then the company must meet the legal disclosure and format requirements. Generally, this means the company must tell the consumer about his or her cancellation right and include a specific disclosure to the consumer in the contract. In addition, the company must give the consumer two copies of a cancellation notice – one for the consumer’s records and one to return if the consumer decides to cancel the sale.
If the consumer decides to cancel the sale within the allotted time, he or she must follow the instructions on the cancellation notice and return the product to the company or make it available for pickup, and the company must go ahead with the refund within a set period of time.
The consequences of not giving the cancellation notice are serious as non-compliance allows the consumer to cancel well beyond the three-day period. The additional time for cancellation depends on the applicable state laws but can mean either that the consumer may cancel until such time as he or she receives the proper cancellation notice or that the consumer may cancel for a “reasonable time period,” as would be determined by a court.
There are some exceptions including for low-dollar sales (under $25 in a consumer’s home or under $130 in a seller’s temporary location), emergencies, craft fairs, and other specific transactions. If you question whether your transactions meet an exception, contact our office and we can discuss the specifics of your transaction.