FTC Retains Door-to-Door Sales Rule but Proposes Higher Exemption Amount

The Federal Trade Commission recently released its decision to retain its rule requiring disclosure of a buyer’s right to cancel door-to-door sales of consumer goods and services (Cooling-Off Rule). Simultaneously, to account for inflation, the FTC also proposed to increase the purchase price amount that triggers the Rule’s disclosure requirements from $25 to $130.

In 2009, as part of a systematic review of its regulations, the FTC sought comments on the effectiveness of the Cooling-Off Rule (which dates back to 1972) and whether there was a continuing need for it. Under the Rule, a door-to-door seller of consumer goods or services with a purchase price of $25 or more must provide buyers with a completed receipt or copy of the sales contract containing a summary notice of the right to cancel the purchase within three business days, as well as duplicate copies of a completed cancellation notice. (For purposes of the rule, door-to-door sales are sales made at a place other than the seller’s place of business.)

Most of the FTC’s discussion of its decision responds to commenters’ requests for clarification of the Cooling-Off Rule. (The FTC received five comments, with one filed jointly by four consumer groups that included the National Consumer Law Center and Consumers Union.) In elaborating on its decision, the FTC:

  • Declined to amend the Rule to add “rent-to-own” to the list of covered transactions, but stated that “nothing in the Rule prevents its application to rent-to-own transactions away from a seller’s place of business when such transactions meet the Rule’s other requirements”
  • Concluded that the Rule should extend to door-to-door sales of mortgage assistance relief services
  • Declined to modify the Rule to state that consumers have a continuing right to cancel if the seller fails to provide the required notice
  • Declined to add a provision to the Rule preempting all state and local cooling-off rules, noting that such rules may explicitly provide a continuing right to cancel if there is noncompliance
  • Declined to expand the Rule to cover transactions with online payday lenders
  • Declined to modify the Rule to prohibit the use of arbitration provisions by door-to-door sellers, noting that the commenters requesting the prohibition had “presented no evidence to show that there is any widespread abuse of arbitration agreements occurring within the door-to-door sales industry that might warrant [such a prohibition]”

Comments on the FTC’s proposed $130 exemption amount are due by March 4, 2013.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, Practice Leader Jeremy T. Rosenblum at 215.864.8505 or rosenblum@ballardspahr.com, John L. Culhane, Jr., at 215.864.8535 or culhane@ballardspahr.com, Mercedes Kelley Tunstall at 202.661.2221 or tunstallm@ballardspahr.com, or Mark J. Furletti at 215.864.8138 or furlettim@ballardspahr.com.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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