Some consumers who purchased expensive photographic packages from a door-to-door representative will be allowed to rescind their contracts, the Federal Trade Commission announced today after settling a complaint that the company violated the Commission's "Cooling-Off Rule" by failing to honor valid cancellation notices, misrepresenting consumers' rights to cancel their contracts, and failing to inform buyers orally of their right to cancel their orders. Under the agreement, Maryland resident Vernon Sanders, doing business as Consolidated Promotions, also will be permanently enjoined from violating the Rule in the future and from reporting negative information to a credit reporting agency about certain consumers. The Commission had previously approved and referred a complaint to the Department of Justice in the matter, which was filed against Sanders in Maryland District Court.
"When consumers buy at the front door, they should be able to do so with confidence that they can change their mind," said Jodie Bernstein, Director of FTC's Bureau of Consumer Protection. "The Cooling-Off Rule gives shoppers three days to cancel most purchases they make from a seller who comes to their home, and it requires the seller to say so."
The "Cooling-Off Rule," (formally called the FTC's Trade Regulation Rule Concerning Cooling-off Period for Sales Made at Homes or Certain Other Locations) protects consumers who make purchases at places other than traditional brick-and-mortar sites or online.
According to the Commission's complaint, Consolidated Promotions and Sanders violated the Rule while selling photographic packages door-to-door. The packages were often sold to low-ranking members of the military -- a group that has historically been vulnerable to such high-pressure sales.
For the past several years, Consolidated has targeted military personnel through direct mail advertising. The ads, which were usually sent to on-base housing, offered consumers a free gift for agreeing to set up an in-home meeting to discuss the company's products. The meeting was actually a lengthy sales pitch for Consolidated's photographic packages. Each of the packages included film, discount film processing and other special photographic services. Packages typically cost between $1,200 and $2,500. Most consumers who bought them paid a small down-payment (usually $60) and financed the rest. Consolidated also handled its own financing and therefore had contact with credit bureaus.
The complaint alleges that Consolidated and Sanders violated the "Cooling-Off Rule" by: 1) failing to honor valid cancellation notices; 2) misrepresenting consumers' rights to cancel their contracts; and 3) failing to inform each buyer orally of his or her right to cancel their order.
Under the terms of the consent, Consolidated and Sanders will be permanently enjoined from any violations of the "Cooling-Off Rule," and will also be required to:
Sanders will receive a copy of all affidavits received by the Commission and will have seven days to contest the customers' claims. A Commission representative will review all affidavits received and decide whether each customer is entitled to cancel the contract. The Commission's decisions will be binding and not appealable.
Sanders will also be responsible for paying the expenses for completing the cancellation procedure. In addition, he will be permanently restrained from reporting negative information to credit agencies about any customer who provides an affidavit to the Commission. If he has reported such negative information in the past, he must notify the agency within 20 days that the negative information should be removed. Finally, the consent also contains routine record-keeping and reporting requirements.
The Commission vote to accept the proposed consent decree was 5-0.
NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law.
NOTE: Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Stipulated final orders have the force of law when signed by the judge.
Copies of the documents mentioned in this release are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. X000062, Civil Action No. AMD 99-2995)