Understanding and Applying The Cooling-Off Rule
When someone buys something at a store and later changes their mind, they may or may not be able to return the merchandise. But when someone buys an item while in their home or at a location that is not the seller's permanent place of business, they may have the option to cancel the sale, but with limitations.
The Federal Trade Commission's "Cooling-Off Rule" gives buyers three days to cancel purchases of $25 or more made at their home and $130 or more made at a temporary location.
Under the Cooling-Off Rule, a buyer's right to cancel for a full refund extends until midnight of the third business day after the sale.
The "Cooling-Off Rule" was adopted to protect consumers from falling victim to deceptive practices of salespeople working away from their permanent place of business. The federal regulation applies to sales at the buyer's home, workplace or dormitory, or at facilities rented by the seller on a temporary or short-term basis, like hotel or motel rooms, convention centers, fairgrounds, and restaurants. The "Cooling-Off Rule" applies even when the buyer invites the salesperson to make a presentation in their home.
Under the "Cooling-Off Rule", the salesperson must inform the buyer about their right to cancel the transaction at the time of sale. They are required to give a buyer two copies of a cancellation form (one to keep and one to send) and a copy of the contract or receipt.
The contract or receipt should be dated, show the name and address of the seller, and explain the buyer's right to cancel the sale. The contract or receipt must be in the same language that is used in the sales presentation.
Biggest Myth About the Rule
One of the biggest myths about the "Cooling-Off Rule" is regarding the purchase of a motor vehicle.
Many people believe that the Rule means that they can buy a car, try it out for three days, then return it for a full refund, when actually the opposite it true. The "Cooling-Off Rule" does not apply to the sale of motor vehicles sold at temporary locations as long as the seller has a permanent place where they do business.
Other Exceptions to the Rule
Some types of sales cannot be canceled even if they do occur in locations normally covered by the Rule. The Cooling-Off Rule does not cover:
- Sales under $25 made at the buyer's home.
- Sales under $130 made at a temporary location.
- A sale of goods or services not primarily intended for personal, family or household purposes. The Rule applies to courses of instruction or training.
- Sales made entirely online, by mail, or by telephone.
- Sales that are the result of prior negotiations at the seller's permanent business location where the goods are sold regularly.
- A sale purchased to meet an emergency.
- A sale that is made as part of your request for the seller to do repairs or maintenance on your personal property (purchases made beyond the maintenance or repair request are covered).
- Sales of real estate, insurance, or securities.
- Sales of automobiles, vans, trucks, or other motor vehicles sold at temporary locations, provided the seller has at least one permanent place of business.
- Sales of arts or crafts sold at fairs or locations such as shopping malls, civic centers, and schools.
How to Cancel
To cancel a sale, sign and date one copy of the cancellation form. Mail it to the address given for the cancellation, making sure the envelope is post-marked before midnight of the third business day after the contract date. (Saturday is considered a business day. Sundays and federal holidays are not business days.
Because proof of the mailing date and proof of receipt are important, consider sending the cancellation form by certified mail so you can get a return receipt. Or, consider hand delivering the cancellation notice before midnight of the third business day. Keep the other copy of the cancellation form for your records.
If the seller did not give cancellation forms, you can write your own cancellation letter.
It must be post-marked within three business days of the sale.
You do not have to give a reason for canceling your purchase. You have a right to change your mind.
Seller Rights With Canceled Sales
If you cancel your purchase, the seller has 10 days to:
- Cancel and return any check you signed.
- Refund all your money and tell you whether any product you still have will be picked up, and return any trade-in.
Within 20 days the seller must either pick up the items left with you or reimburse you for mailing expenses if you agreed to send back the items.
If you received any goods from the seller, you must make them available to the seller in as good condition as when you received them. If you do not make the items available to the seller - or if you agree to return the items but fail to - you remain obligated under the contract.
If you have a complaint about sales practices that involve the Cooling-Off Rule, you can write to:
Consumer Response Center
Federal Trade Commission
Washington, DC 20580
You also may wish to contact a consumer protection office in your city, county, or state. Some state laws give you more rights than the FTC's Cooling-Off Rule, and some local consumer offices can help you resolve your complaint.
In addition, if you paid for your purchase with a credit card and a billing dispute arises about the purchase (for example, if the merchandise shipped was not what you ordered), you can notify the credit card company that you want to dispute the purchase.
Under the Fair Credit Billing Act, the credit card company must acknowledge your dispute in writing and conduct a reasonable investigation of your problem. You may withhold payment of the amount in dispute until the dispute is resolved. (You are still required to pay any part of your bill that is not in dispute.)
To protect your rights under the Fair Credit Billing Act, you must send a written notice about the problem to the credit card company at the address for billing disputes specified on your billing statement within 60 days after the first bill containing the disputed amount is mailed to you.
If the 60-day period has expired or if your dispute concerns the quality of the merchandise purchased, you may have other rights under the Act. If you have questions about the Fair Credit Billing Act, write for the free brochure called the "Fair Credit Billing" at:
Consumer Response Center
Federal Trade Commission,
Washington, DC 20580
The Rule's complete name and citation are: Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations; 16 CFR Part 429.