Did You Know There's a Cure for Buyer's Remorse?

The Three-Day Cooling-Off Rule protects consumers from high-pressure sales tactics, so they need to know their rights. And well-intentioned businesses that don’t want to get shafted need to know them, too.

(Image credit: sturti)

Most of us know someone who just can’t say no who has gotten themselves into either some kind of an uncomfortable social situation — saying yes to an invitation that their spouse would never agree to, or, worse yet, caving into high pressure and buying something they didn’t need or want from a door-to-door salesperson.

Years ago there were thousands of stories about people being paid visits by door-to-door salesmen, winding up buying all kinds of unneeded home appliances, magazine subscriptions, encyclopedias and dictionaries, later trying to get out of the contracts and failing. That eventually led to the Federal Trade Commission’s Three-Day Cooling-Off Rule, which went into effect nationally in 1972.

While this is one of the oldest examples of federal consumer protections with a version thereof in each state, even today I am amazed at the numbers of people who have no idea that it applies to their business, their employees and customers.

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So, briefly, just what is the Three-Day Cooling-Off Rule, or Three-Day Cooling-Off Period as it is also called, and who is covered by it? The Federal Trade Commission and most states define it this way (opens in new tab):

“The Cooling-Off Rule gives you a three-day right to cancel a sale made at your home, workplace, dormitory or at a seller’s temporary location, like a hotel or motel room, convention center, fairground or restaurant. It also applies when you invite a salesperson to make a presentation in your home. But not all sales are covered.”

Must Receive 2 Copies of the Cancellation Form

Next — and this is critical — by law, the seller must tell you about your right to cancel at the time of sale, provide two copies of a filled out cancellation form (one to keep and one to mail back in if you decide to cancel) and a copy of your contract or receipt. The contract or receipt should be dated, showing the name and address of the seller, and explain your right to cancel, and be in the same language that was used during the sales presentation.

Your right to cancel for a full refund extends until midnight of the third business day after the sale, and no reason has to be given, even if you get called by an angry college kid saying that unless you buy these magazines, he will not have enough money for next semester’s tuition. Yes, that happens just about every day.

Over the years, my law office has seen everything from expensive cutlery, vacuum cleaners, pots and pans, blenders, huge, unabridged dictionaries, cosmetics — you name it, embarrassed couples have brought all this stuff in, begging for help in canceling the contract they signed. The value of many of these items can ran into the hundreds of dollars, often sold to the elderly on a small fixed income with no need and no way to pay for it.

Not All Sales are Covered

The Cooling-Off Rule does NOT apply to sales that are:

  • Under $25 for sales made at your home; under $130 for sales made at a temporary location, such as a county fair.
  • For goods or services not primarily intended for personal, family or household purposes, such as for a business or some commercial enterprise.
  • Purchases made entirely online, by mail or telephone.
  • The result of prior negotiations at the seller's permanent place of business where the goods are sold regularly.
  • In the event of a true an emergency, for example, flood, fire, wind damage.

So, if a windstorm blew down a tree onto your house and a tree service came out to remove it, this would most likely be seen as an emergency, where the rule would not apply.

It Also Does Not Apply to

  • Real estate transactions, insurance, or securities.
  • Automobiles, vans, trucks or other motor vehicles sold at temporary locations if the sealer has at least one permanent place of business.
  • But in some states, it is possible to purchase from the dealer a right to cancel for an extra charge.
  • Arts or crafts sold at fairs or places like shopping malls, civic centers and schools.

Home Improvement Contracts

One area where understanding the power of the Three-Day Cooling-Off Period can be a real life saver for a consumer — or cost a clueless contractor his shirt — is home improvement contracts. These are projects to repair or remodel things at home over a certain dollar amount — typically $500 — and must include information on various consumer protection rights, especially the Three-Day Cooling-Off Period.

Over the years I have lectured to contractors on their legal responsibilities, finding that those who want to be in business a long time obey the law. But it doesn’t take much to obtain a contractor’s license in most states, and the bad rap this profession earns is often highly deserved.

So, what can happen if a contractor fails to provide that Three-Day Cooling-Off Period notice? Say he completes a $35,000 kitchen remodel and does a great job. When he hands the customer the bill, the customer says, “You failed to give me that notice, and under the law, I can cancel at any time and not pay you. That’s what I am doing.”

While the outcome varies among the states, often, the contractor takes nothing and if the homeowner wants his kitchen restored, he’s entitled to that, and guess who pays!

Insurance against getting carried away by a nifty sales presentation

Let’s face it. There are some truly super salespeople roaming the world who believe in their products and convey that enthusiasm to potential buyers. And human nature being what it is, I think that it’s fair to say that most people do not want to hurt the feelings of that enthusiastic knife salesperson, which results in saying “Yes, of course,” instead of asking ourselves, “Don’t we already have enough kitchen knives?”

Just think timeshares! How many people reading this story have been through a timeshare presentation and been so convinced of the value of owning one that the contract was signed without any discussions with an attorney or CPA. That’s why, where timeshares are concerned, the cancellation period typically runs for much more than three days, giving buyers a chance to calm down and think about the long-term consequences.

That’s the reason for the rule, to protect us from ourselves, from acting impulsively, or, due to age or some health issue, not being clear-minded at that time, and allowing ourselves to be swept up in the excitement of buying something new and exciting. Haven’t we all been there at one time or another?

Moral to the story: Business owners need to understand the applicability of the Three-Day Cooling Off period in their state. And consumers? Just be aware that the nice salesperson will appear to be your newest, best friend. One tactic aimed at discouraging cancellations is calculated to make the buyers feel guilty if canceling and goes like this:

“Of course you have the right to cancel our contract, and here is the form, all filled out. If you have any doubts, then, please, do not sign the contract, and I will be on my way, with no hard feelings. I’ll just tell my boss that our amazing Knife Set was simply not something that you needed, and I will lose credit for this demo, but I do not want you to feel guilty. I’ve enjoyed spending time with you, and that’s a fact!

“Remember, at any time within the three days allowed, you can cancel, and I am the only one who loses, I just wanted you to be sure of your rights, but I know you are going to fall in love with our knives and be glad that we met.”

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

H. Dennis Beaver, Esq.
Attorney at Law, Author of "You and the Law"

After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, "You and the Law (opens in new tab)." Through his column he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."