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FEDERAL TRADE COMMISSION

16 CFR Part 429

Trade Regulation Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations

AGENCY: Federal Trade Commission ("FTC" or "Commission").
ACTION: Request for public comment.
SUMMARY: The Commission requests public comment on its Trade Regulation Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations ("Cooling-Off Rule" or "Rule"). The Commission is soliciting public comment as part of the FTC's systematic review of all current Commission regulations and guides.
DATES: Written comments concerning the Cooling-Off Rule must be received no later than June 22, 2009.
FOR FURTHER INFORMATION CONTACT: Sana Coleman Chriss, Attorney, (404) 656-1364, Federal Trade Commission, Southeast Region, 225 Peachtree Street, NE, Suite 1500, Atlanta, Georgia 30303.
SUPPLEMENTARY INFORMATION: I. Background

The Cooling-Off Rule was promulgated by the Commission on October 26, 1972, and it was last amended on October 20, 1995.2The Rule, as amended, declares it an unfair and deceptive practice for a seller engaged in a “door-to-door sale”3of consumer goods or services, with a purchase price of $25 or more, to fail to provide the buyer with certain oral and written disclosures regarding the buyer’s right to cancel the contract within three business days from the date of the sales transaction.4The Rule also requires such sellers, within 10 business days after receipt of a valid cancellation notice from a buyer, to honor the buyer’s cancellation by refunding all payments made under the contract, returning any traded-in property, cancelling and returning any security interests created in the transaction, and notifying the buyer whether the seller intends to repossess or abandon any shipped or delivered goods.

237 FR 22933 (Oct. 26, 1972); 60 FR 54180 (Oct. 20, 1995).

3A “door-to-door sale” includes sales made at a place other than the place of business of the seller (e.g., sales at the buyer’s residence or at facilities rented on a temporary or short term basis, such as hotel or motel rooms, convention centers, fairgrounds and restaurants, or sales at the buyer’s workplace or in dormitory lounges). 16 CFR 429.0(a).

4As a basis for promulgating the Rule, the Commission identified five categories of complaints directed to the industries utilizing door-to-door marketing techniques: (1) deceptive tactics for getting in the door; (2) high pressure sales tactics; (3) misrepresentation of price, quality, and characteristics of the product; (4) high prices for low quality merchandise; and (5) the nuisance created by the uninvited salesperson. 37 FR 22937-940 (Oct. 26, 1972).

In addition, the Rule requires door-to-door sellers to furnish the buyer with a completed receipt, or a copy of the sales contract, containing a summary notice informing the buyer of the right to cancel the transaction, which must be in the same language as that principally used in the oral sales presentation. Door-to-door sellers also must provide the buyer with a completed cancellation form, in duplicate, captioned either “Notice of Right to Cancel” or “Notice of Cancellation,” one copy of which can be returned by the buyer to the seller to effect cancellation.

The Rule provides for certain exemptions and excludes certain transactions from the definition of the term “door-to-door sale.” Specifically, the Rule exempts: (1) sellers of automobiles, vans, trucks or other motor vehicles sold at auctions, tent sales or other temporary places of business, provided that the seller is a seller of vehicles with a permanent place of business; and (2) sellers of arts and crafts sold at fairs or similar places. The Rule also excludes certain transactions, including, for example, transactions conducted and consummated entirely by mail or telephone, and without any other contact between the buyer and seller or its representative prior to the delivery of goods or performance of services; transactions pertaining to the sale or rental of real property, to the sale of insurance, or to the sale of securities or commodities by a broker-dealer registered with the Securities and Exchange Commission; and transactions in which the consumer is accorded the right of rescission by the provisions of the Consumer Credit Protection Act (15 U.S.C. 1635) or its regulations.

Finally, the Rule expressly preempts any state laws or municipal ordinances that are directly inconsistent with the Rule, including, for example, state laws or ordinances that impose a fee or penalty on the buyer for exercising his or her right under the Rule, or that do not require the buyer to receive a notice of his or her right to cancel the transaction in substantially the same form as provided in the Commission’s Rule.

II. Regulatory Review of the Cooling-Off Rule

The Commission periodically reviews each of its rules and guides to seek information about their costs and benefits and their regulatory and economic impact. The information obtained during these periodic reviews assists the Commission in identifying rules and guides that either should beretained without modification, amended, or rescinded. This Notice commences the Commission’s review of the Cooling-Off Rule.

As part of its review, the Commission seeks comment on a number of general issues, including the continuing need for the Rule, its economic impact, and the effect of any technological, economic, or industry changes on the Rule.

III. Issues for Comment

The Commission requests written comment on any or all of the following questions. The Commission asks commenters to make their responses as specific as possible and to include both a reference to the question being answered and any references to empirical data or other evidence wherever available and appropriate.

(1) Is there a continuing need for the Rule? Why or why not?

(2) Are there practices addressed by the Rule for which regulation is no longer needed? If so, explain and provide supporting evidence.

(3) What benefits has the Rule provided to consumers? What evidence supports the asserted benefits?

(4) What modifications, if any, should be made to the Rule to increase its benefits to consumers?

(a) What evidence supports the proposed modifications?

(b) How would these modifications affect the costs and benefits of the Rule for consumers?

(c) How would these modifications affect the costs and benefits of the Rule for businesses, and in particular for small businesses?

(5) What impact has the Rule had on the flow of truthful information to consumers and on the flow of deceptive information to consumers? What evidence supports the impact that you have identified?

(6) What significant costs has the Rule imposed on consumers? What evidence supports the asserted costs?

(7) Should any modifications be made to the Rule to reduce the costs imposed on consumers?

(a) What evidence supports the proposed modifications?

(b) How would these modifications affect the costs and benefits of the Rule for consumers?

(c) How would these modifications affect the costs and benefits of the Rule for businesses, and in particular for small businesses?

(8) Is the cancellation notice language provided in the Rule easy for consumers to read and understand? Why or why not? Should the language be modified in any way to improve consumers’ understanding of their rights and obligations under the Rule? If so, how?

(9) What benefits has the Rule provided to businesses, and in particular to small businesses? What evidence supports the asserted benefits?

(10) Should any modifications be made to the Rule to increase its benefits to businesses, and in particular to small businesses?

(a) What evidence supports your proposed modifications?

(b) How would these modifications affect the costs and benefits of the Rule for consumers?

(c) How would these modifications affect the costs and benefits of the Rule for businesses?

(11) What significant costs, including costs of compliance, has the Rule imposed on businesses, and in particular on small businesses? What evidence supports the asserted costs?

(12) Should any modifications be made to the Rule to reduce the costs imposed on businesses, and in particular on small businesses?

(a) What evidence supports the proposed modifications?

(b) How would these modifications affect the costs and benefits of the Rule for consumers?

(c) How would these modifications affect the costs and benefits of the Rule for businesses?

(13) What evidence is available concerning the degree of industry compliance with the Rule?

(14) Should the Rule be modified to reflect any technological changes in communications methods or methods for buying and selling goods and services, including, for example, changes in the use of the Internet, electronic mail, or mobile communications? If so, how? What evidence supports the proposed modification?

(15) Have there been any significant industry or economic changes since 1995 that warrant modifying the types of sellers that are exempt from the Rule?

(16) What potentially unfair or deceptive door-to-door sales practices, if any, are not covered by the Rule that should be? Provide evidence to support the assertion.

(17) Does the Rule overlap or conflict with other federal, state, or local laws or regulations? If so, how?

(a) What evidence supports the asserted conflicts?

(b) With reference to the asserted conflicts, should the Rule be modified? If so, why, and how? If not, why not?

(c) Is there evidence concerning whether the Rule has assisted in promoting national consistency with respect to the regulation of door-to-door sales? If so, please provide that evidence.

(18) Have there been any significant changes since 1995 in U.S. consumer credit protection laws or other laws that warrant modification of the Rule? If so, explain and provide evidence to support the proposed modification.

List of Subjects in 16 CFR Part 429

Sales Made at Homes or at Certain Other Locations; Trade practices.

Authority:

Sections 1-23, FTC Act, 15 U.S.C. 41-58.

By direction of the Commission.

Donald S. Clark, Secretary