FYI: FTC Has Decided To Retain with Minor Changes its Cooling-Off Rule

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The Federal Trade Commission has decided to retain with minor changes its Cooling-Off Rule, which gives consumers three days in which to cancel -- and receive a full refund on -- purchases of $25.00 or more when made in the consumer's home or at certain locations away from the seller's normal place of business. The rule continues to serve a useful function, the FTC concluded after examining the rule as part of its periodic review of rules and guides to determine their effectiveness and impact. Therefore, the Commission will retain the rule in its present form with minor non-substantive changes. A discussion of the Commission's decision and the slightly modified rule was published in the Oct. 20 Federal Register.

Door-to-door sales and face-to-face transactions at places other than the seller's permanent retail or other business location continue to be a significant part of our economy. According to Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection, "This rule provides consumers with important protections in places where they are especially vulnerable to high pressure sales techniques and deceptive practices. The rule gives consumers the ability to cancel their purchases, if that seems advisable."

The Commission's Cooling-Off Rule, promulgated in 1972, requires sellers, when selling at places other than their regular places of business, to inform buyers of their right to cancel the sale within three business days and receive a full refund when the purchase price is $25.00 or more. In addition, the seller must furnish the buyer with a summary of the buyer's cancellation rights, and two copies of an actual cancellation form. In November 1988, the Commission granted exemptions to sellers of arts and crafts at fairs, and sellers of automobiles at temporary places of business who have at least one permanent place of business. With the exception of these sales, the rule applies to sales made "at a place other than the place of business of the seller," such as in consumers' homes or at hotels or other temporary business locations.

In April 1994, the Commission sought public comment on a number of questions pertaining to the operation and effectiveness of the rule, whether the rule should continue to apply to sales solicited at a temporary business location, and whether the rule should be modified or rescinded. After carefully considering the comments received from 10 organizations, the Commission found that the rule serves a useful function and that there is a continuing need for it. The FTC also concluded that the rule provides substantial benefits to consumers without imposing unreasonable costs on sellers. Therefore, the Commission has terminated its review of the Cooling-Off Rule.

In addition, the Commission has made minor amendments to the rule to:

-- update the list of federal holidays in the definition of "business day";

-- change the title of the rule from -- Cooling-Off Period for Door-to-Door Sales -- to Cooling-Off Period for Sales Made at Homes or at Certain Other Locations, to make clear that it applies to more than sales in a consumer's home;

-- add clarifying examples of locations where the rule applies;

-- change the typeface of the sample "Notice of Cancellation";

-- use gender-neutral terms;

-- reorganize some sections of the rule; and

-- expand the exemption for automobile sales to cover other motor vehicles, such as trucks, campers and vans.

The Commission vote to retain the Cooling-Off Rule was 5-0.

Copies of Federal Register notice, the Rule, and other documents associated with this matter, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov

(FTC Matter No. P944201)

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