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The Cooling-Off Rule

If customers buy a product at a store and later change their minds, they may not be able to return the merchandise. However, federal and state laws provide certain protections for consumers who purchase items sold outside the vendor’s usual place of business. For example, under the Federal Trade Commission’s (FTC’s) “Cooling Off Rule,” consumers have until midnight of the third business day after signing a contract to cancel the contract. This rule applies when a consumer has entered the following deals:

  • A door-to-door contract involving a sale over $25
  • A contract for more than $25 made at a place other than the seller’s regular place of business. There are similar laws in every state

The fact is the FTC’s Cooling-Off Rule only applies to purchases made at a place that is not the seller’s permanent place of business. For example, the law would apply to goods customers buy in their own homes, their workplaces, in a student’s dormitory, or at spaces temporarily rented by the seller, like hotel or motel rooms, convention centers, fairgrounds, and community centers.

The Cooling-Off Rule guarantees the customer’s right to cancel a sale and to receive a full refund. This right extends only until midnight of the third business day after the sale. If the customer notifies the seller of the intent to cancel the purchase within the cooling-off period, the customer is entitled to a full refund, and any contract that the customer signed must be rescinded without further obligation.

Under the FTC’s Cooling-Off Rule the seller must inform customers about their cancellation rights; this should happen at the time of the sale. Additionally, the seller is obligated to provide customers with two copies of a cancellation form. One the customer can keep for his records and one to send with the returned merchandise. The seller must also provide the customer with a copy of the contract or receipt. The contract or receipt must be in the same language that was used in the sales presentation. For example, if the presentation was made in Chinese, the contract or receipt must also be in Chinese.

The contract or receipt must contain the following information:

  • date of the sale
  • the seller’s name and address
  • an explanation of right to cancel the sale

Inside The Cooling-Off Rule