A client called me the other day and asked about canceling the purchase of an automobile. They thought they had 3 days to cancel the purchase. Unless the salesman came to their home and wrote the sale there, I told them, they had no right to cancel.
In general, when you buy something at a store or merchant’s place of business and later change your mind, you don’t have the right to return the merchandise just because you change your mind and no longer want it. However, if you buy an item in your home or at a location that is not the seller’s permanent place of business, you may have the option to cancel the sale and return the goods for a full refund. Here’s how the rule works:
Under a Federal Trade Commission (FTC) rule know as the “Cooling-Off Rule,” you have three days to cancel certain purchases. You do not have to give a reason for canceling – you have the right to change your mind.
The Cooling-Off Rule applies to sales that take place at your home, workplace, or dormitory. It also applies to sales that take place at facilities rented by the merchant on a temporary basis, such as hotel or motel rooms, convention centers, and restaurants. The Cooling-Off Rule applies even when you invite a salesperson to come to your home to make a sales presentation. Under the Cooling-Off Rule, your right to cancel for a full refund extends until midnight of the third business day after the sale. You do not need a reason to cancel your purchase under the rule.
The salesperson must tell you about your cancellation rights at the time of sale. (The contract or receipt should explain your right to cancel, too.) They must also give you two copies of a cancellation form (one to keep and one to send) and a copy of your contract or receipt. (If the seller did not give you cancellation forms, you can write your own cancellation letter.)
As with any rule, there are exceptions. The Cooling-Off Rule does not cover sales that: (i) are under $25; (ii) are for goods or services not primarily intended for your personal, family, or household purposes; (iii) are made entirely by mail or telephone; (iv) are the result of prior negotiations at the seller’s permanent business location where the goods are regularly sold; (v) are needed to meet an emergency are 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).
In addition, sales exempt from the Cooling-Off Rule are those involving: (i) real estate, insurance, or securities; (ii) automobiles, vans, trucks, or other motor vehicles sold at temporary locations, provided the seller has at least one permanent place of business; (iii) arts or crafts sold at fairs, shopping malls, civic centers, schools, and the like.
A cancellation notice must be sent before midnight of the third business day after the contract date. (Saturday is considered a business day under the rule; Sundays and federal holidays are not.) Proof of the mailing date and proof of receipt are important, so one should consider sending the cancellation notice by certified mail with a return receipt request. If the merchant is local, the cancellation notice may be hand delivered. One must make sure to retain a copy of the cancellation form or letter.
If you cancel your purchase, the merchant has 10 days to: (a) cancel and return any promissory note or debt instrument you signed; (b) refund all your money and tell you whether any product you still have will be picked up; and (c) return any trade-in. Within 20 days, the merchant must either pick up the items, or reimburse you for mailing expenses, if you agree to send the items back.
You must make the purchased items 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 don’t, you remain obligated under the contract.