Consumer Rights: The Cooling Off Rule

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What Is the Cooling-off Rule?

The Federal Trade Commission’s (FTC’s) “Cooling-Off Rule” allows a consumer to return an item that was purchased at a location that is not the seller’s permanent physical place of business.The Cooling-Off Rule is a form of consumer protection and is frequently applied to companies that operate through door-to-door sales.

For example, if someone is watching an infomercial in their home, the Cooling-Off Rule gives that person 3 days to return the purchase or cancel a contract or other signed order. The sale must involve a purchase or contract worth $25 or more. 

When Does the Cooling-off Rule Apply?

The FTC’s Cooling-Off Rule applies to any sales made at the buyer’s home or place of residence, workplace, or dormitory. It also applies in situations where the seller rents facilities on a short term basis. Therefore, if the sale was made at a convention center, hotel, or fairgrounds, the buyer will have 3 days to return the product or cancel the contract. The Cooling-Off Rule even applies if the buyer invited the salesperson into their home in order to conduct a sale.

What Type of Notice Is Required That the Cooling-off Rule Applies?

According to the Cooling-Off Rule, the seller is required to inform the buyer of their cancellation rights at the time of the sale. They must also provide the buyer with two copies of a cancellation form; one for sending the item back, and the other for the buyer's records. The buyer must also be given a copy of their receipt and contract. 

The receipt or contract should include a date, as well as the name and address of the salesperson. The receipt must also clearly explain the buyer's cancellation rights. The language in the receipt or the contract should be the same as that used in the sales transaction. 

Are there any Exceptions to the Cooling-off Rule?

Yes- the Cooling-Off Rule does not apply if:

The Cooling-Off Rule also does not apply to purchases involving insurance, securities, or real estate. Sales of automobiles and other motor vehicles are also exempt if the seller has at least one permanent location for business sales. Finally, the Rule does not apply to crafts or arts that are sold at temporary locations such as fairgrounds. 

How Do I Cancel a Sale or Contract under the Cooling-off Rule?

If the Cooling-Off Rule applies to a purchase, the buyer should completely fill out the cancellation notices they were given at the time of the sale or contract signing. The next step would be to mail one of them to seller, and keep the other copy for their own records. Be sure that the mailing is post-marked before the midnight of the 3rd business day after the sale.

Once the sale or contract is canceled, the seller has 10 days to finalize the cancellation and provide the buyer with a refund or exchange. The seller also has 20 days from the date of cancellation to pick up the canceled purchase or to provide a reimbursement, including any mailing expenses for the return. 

What If the Seller Has Violated the Cooling-off Rule?

A seller may violate the Cooling-Off Rule if they fail to provide a receipt or fail to inform a buyer of their cancellation rights. Violations may also occur if the seller fails to cancel an order or provide the buyer with reimbursements. 

If a violation has occurred, the seller may be entitled to reimbursement for the product, and possibly for any losses associated with the seller’s violation. The seller could also potentially be liable under breach of contract rules

Do I Need a Lawyer?

The Cooling-Off Rule is an important mechanism for protecting consumer rights, and any violations may result in legal consequences. If your consumer rights have been violated under the Cooling-Off Rule, you should strongly consider contacting a consumer protection lawyer for advice. Your attorney may be able to help you obtain compensation for the violation, and possibly for other resulting losses.

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Last Modified: 09-05-2014 04:20 PM PDT

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