[Federal Register Volume 78, Number 12 (Thursday, January 17, 2013)]
[Proposed Rules]
[Pages 3855-3864]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31558]
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FEDERAL TRADE COMMISSION
16 CFR Part 429
Rule Concerning Cooling-Off Period for Sales Made at Homes or at
Certain Other Locations
AGENCY: Federal Trade Commission.
ACTION: Proposed rule amendment; request for public comment.
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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') has
completed its regulatory review of the Trade Regulation Rule Concerning
Cooling-Off Period for Sales Made at Homes or at Certain Other
Locations (``Cooling-Off Rule'' or ``Rule'') as part of the
Commission's systematic review of all current Commission regulations
and industry guides. The Rule makes it an unfair and deceptive act or
practice for a seller engaged in a door-to-door sale of 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. Based on the comments received, the
Commission has determined to retain the Rule. In addition, the
Commission is soliciting public comment on a proposed increase in the
$25 exclusionary limit identified in the Rule to account for inflation
since the exclusionary limit was established.
DATES: Written comments concerning the Cooling-Off Rule must be
received no later than March 4, 2013.
ADDRESSES: Interested parties may file a comment online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Cooling-Off Rule
Regulatory Review, 16 CFR 429, Comment, Project No. P087109'' on your
comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/coolingoffproposedamend, by following
the instructions on the web-based form. If you prefer to file your
comment on paper, mail or deliver your comment to the following
address: Federal Trade Commission, Office of the Secretary, Room H-113
(Annex C), 600 Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Sana Coleman Chriss, Attorney, (404)
656-1364, or Cindy A. Liebes, Regional Director, (404) 656-1390,
Federal Trade Commission, Southeast Region, 225 Peachtree Street NE.,
Suite 1500, Atlanta, Georgia 30303.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Commission systematically reviews all its rules and guides to
ensure they continue to achieve their intended purpose without unduly
burdening commerce. These reviews seek information about the costs and
benefits of the rules and guides, and their regulatory and economic
impact. The information obtained assists the Commission in identifying
rules and guides that warrant modification or rescission.
To that end, the Commission sought comment on the effectiveness of
the Cooling-Off Rule, 16 CFR part 429, including the continuing need
for the Rule, its economic impact, and the effect of any technological,
economic, or industry changes on the Rule.\1\ The comment period closed
on September 25, 2009.\2\ The Commission has completed its analysis of
the comments
[[Page 3856]]
and finds that the Cooling-Off Rule continues to serve a valuable
purpose in protecting consumers from unfair and deceptive transactions
that fall within the scope of the Rule. Accordingly, consistent with
the record established in this proceeding, the Commission has
determined to retain the Rule and conclude its regulatory review.
Simultaneously, the Commission has decided to seek public comment on a
proposed increase in the exempted dollar amount identified in section
429.0(a) of the Rule from $25 to $130. This increase would account for
inflation in the years since the Rule was promulgated and could balance
compliance costs and consumer benefits in a manner that is consistent
with the exclusionary limit established at the Rule's promulgation in
1972.
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\1\ Trade Regulation Rule Concerning Cooling-Off Period for
Sales Made at Homes or at Certain Other Locations, Request for
Public Comment, 74 FR 18170 (April 21, 2009).
\2\ Trade Regulation Rule Concerning Cooling-Off Period for
Sales Made at Homes or at Certain Other Locations, Reopening of
Comment Period, 74 FR 36972 (July 27, 2009).
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II. Background of the Regulatory Review
The Cooling-Off Rule was promulgated by the Commission on October
26, 1972, and it was last amended on October 20, 1995.\3\ The Rule, as
amended, declares it an unfair and deceptive act or practice for a
seller engaged in a door-to-door sale \4\ of 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.\5\
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\3\ Cooling-Off Period for Door-to-Door Sales, Trade Regulations
Rule and Statement of Basis and Purpose (``Cooling-Off Rule SBP''),
37 FR 22933 (Oct. 26, 1972); Rules Concerning Cooling-Off Period for
Sales Made at Homes or Certain Other Locations, Final Non-
Substantive Amendments to the Rule, 60 FR 54180 (Oct. 20, 1995).
\4\ Door-to-door sales includes sales, leases, or rentals of
consumer goods or services 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). A seller's place of business is a main or permanent branch
office or local address of the seller. 16 CFR 429.0(d).
\5\ See 16 CFR 429.1. Moreover, as 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. Cooling-Off Rule SBP, 37 FR at 22940.
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In particular, 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 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.
The Rule excludes certain kinds of transactions from the definition
of door-to-door sale, 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, or its regulations.\6\ In addition,
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; \7\ and (2) sellers of arts and crafts
sold at fairs or similar places.\8\
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\6\ 16 CFR 429.0(a) (1)-(6).
\7\ 16 CFR 429.3(a).
\8\ 16 CFR 429.3(b).
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Finally, the Rule preempts only those 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.\9\
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\9\ 16 CFR 429.2.
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III. Regulatory Review Comments and Analysis
The Commission received a total of five comments from: four
consumer groups that filed jointly--the National Consumer Law Center,
Consumers for Auto Reliability and Safety, Consumer Federation of
America, and Consumers Union (collectively, the ``Jointly Filing
Consumer Groups''); the Direct Selling Association (``DSA''); the
National Automobile Dealers Association (``NADA''); a small business,
Fabian Seafood Company; and an individual, Helen Yohanek.\10\ The
comments are discussed below.
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\10\ The comments responsive to this regulatory review have been
placed on the Commission's public record and may be found online at
the following links on the Commission's Web site: http://www.ftc.gov/os/comments/coolingoffrule/index.shtm and http://www.ftc.gov/os/comments/coolingoffrulereopen/index.shtm.
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A. Comments Supporting Retention of the Rule
The Jointly Filing Consumer Groups, DSA, the small business, and
the individual commenter all addressed the issue of whether there is a
continuing need for the Rule. These commenters uniformly concluded that
a continuing need for the Rule does exist. Specifically, DSA stated
that it believes that ``the Rule continues to serve the needs of
consumers and sellers by enhancing the confidence of consumers in
direct selling and serves as an ongoing deterrent to any firm or
salesperson tempted to use high-pressure sales tactics.'' \11\ The
individual commenter stated that she believes the Rule is ``vital to
protect some consumers.'' \12\ The small business owner acknowledged
that while he does not believe the Rule should apply to his business,
he understands that there should be rules for door-to-door sales.\13\
Finally, the Jointly Filing Consumer Groups stated that they see a
``strong continued need for the Rule due to ongoing consumer
vulnerability to the types of abuses which the Rule initially sought to
prevent.'' \14\ No commenters stated that the Rule should be rescinded.
Accordingly, based on its experience and its analysis of the comments,
the Commission finds that the Rule continues to benefit both consumers
and sellers, and that there is a continuing need for the Rule.
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\11\ DSA at 2.
\12\ Yohanek at 1.
\13\ Fabian Seafood at 1 (``I understand that there should be
rules for door-to-door sales, but there should be an exemption for
our type of business, which does not go door-to-door and deals in
perishable food.'').
\14\ Jointly Filing Consumer Groups at 2.
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B. Comments Requesting Clarification of Portions of the Rule
In their comments, the Jointly Filing Consumer Groups requested
that the
[[Page 3857]]
Commission clarify several aspects of the Rule, including whether the
Rule covers rent-to-own transactions; covers services related to real
property; requires payment for services rendered during the cooling-off
period if the right to cancel is properly exercised; and gives
consumers a continuing right to cancel if proper notice is not given.
Each of these requests for clarification is discussed in turn below.
(1) Rent-to-Own Transactions
The Jointly Filing Consumer Groups requested that the Commission
clarify that the Cooling-Off Rule applies to rent-to-own transactions
consummated away from the seller's place of business.\15\ These
commenters argued that rent-to-own transactions in which the consumer
makes weekly payments to rent a product with the stated goal of
ownership, often lead to the consumer paying an exorbitant amount that
is typically more than the product is actually worth.\16\ The
commenters added that rent-to-own businesses target low-income
consumers.\17\ These commenters argued, therefore, that the Rule should
be clarified to make its coverage of rent-to-own transactions evident
to consumers by adding ``rent-to-own'' to the list of transactions set
forth in section 429.0, subsections (a) and (b) of the Rule.\18\
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\15\ Id. at 5.
\16\ Id.
\17\ Id.
\18\ Id.
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In response to this request, the Commission clarifies 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. Accordingly, the Commission believes that it
is not necessary to change the Rule to reflect the Rule's application
to rent-to-own transactions.\19\
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\19\ The Rule broadly defines a door-to-door sale and describes
various exclusions and exemptions from the definition. As noted
above, the definition includes certain sales, leases, or rentals of
consumer goods or services. See supra note 4. The Rule does not
exhaustively list the types of transactions to which the Rule
applies. Attempting to itemize the types of transactions that meet
the definitional requirements of the Rule could result in the Rule
being erroneously interpreted to apply only to those types of
transactions listed in the Rule. Accordingly, the Commission
declines to propose adding rent-to-own transactions to section
429.0, subsections (a) and (b) of the Rule.
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(2) Services Related to Real Property
The Jointly Filing Consumer Groups also requested that the
Commission clarify that the Cooling-Off Rule applies to services
related to real property, such as mortgage modification, mortgage loan
brokerage, and foreclosure rescue services.\20\ The commenters argued
that these services fall under the Rule's definition of ``consumer
services'' because they are primarily for personal, family, or
household purposes in accordance with section 429.0(b) of the Rule.\21\
The commenters also noted that in some instances sellers of these
services identify consumers through foreclosure notices and then
approach the consumers in their homes.\22\
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\20\ Jointly Filing Consumer Groups at 5.
\21\ Id.
\22\ Id. at 6.
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The Commission's Cooling-Off Rule expressly excludes transactions
pertaining to the sale or rental of real property, the sale of
insurance, or the sale of securities or commodities by a broker-dealer
registered with the Securities and Exchange Commission.\23\ As
determined by the Commission when it promulgated the Rule, this
exclusion, which renders the Rule inapplicable to the sale of real
estate, does not necessarily reach so far as to exempt service-related
transactions in which a consumer engages a real estate broker to sell
his or her home or to rent and manage his or her residence during a
temporary period of absence.\24\ Similarly, the exclusion does not
necessarily reach so far as to exempt the types of mortgage assistance
relief services described by the Jointly Filing Commenters.
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\23\ 16 CFR 429.0(a)(6).
\24\ Cooling-Off Rule SBP, 37 FR at 22948.
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Further, in the Mortgage Assistance Relief Services (``MARS'')
rulemaking, the Commission declined to include a right-to-cancel
provision in the final rule for all contracts for such services.\25\
The basis for this decision was the Commission's belief that, although
MARS providers' conduct may undermine consumers' ability to make well-
informed decisions, a right-to-cancel provision is not necessary
because the final MARS Rule requires that MARS providers neither seek
nor accept a fee until the consumer accepts an offer of relief. In the
MARS proceeding, however, the Commission did not receive information
concerning, and did not specifically address, a right to cancel MARS
sales transactions accomplished in a door-to-door sales setting.
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\25\ Mortgage Assistance Relief, Final Rule and Statement of
Basis and Purpose (``MARS SBP''), 75 FR 75092, 75123 (Dec. 1, 2010).
The MARS Rule is codified at 12 CFR part 1015.
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The Commission concludes in the instant proceeding that,
notwithstanding its general determination not to impose a right to
cancel in all MARS transactions, the Cooling-Off Rule's right to cancel
should extend to door-to-door sales of MARS. It does not follow from
the Commission's determination not to include a right-to-cancel
provision in the MARS Rule that other statutes and regulations, such as
the Cooling-Off Rule, cannot impose a remedy on transactions otherwise
covered by those statutes and regulations. Both MARS sales and door-to-
door sales, considered separately, raise concerns. As the Commission
noted in the MARS Rule Statement of Basis and Purpose, ``MARS providers
direct their claims to financially distressed consumers who often are
desperate for any solution to their mortgage problems and thus are
vulnerable to the providers' purported solutions. The Commission has
long held that the risk of injury is exacerbated in situations in which
sellers exercise undue influence over susceptible classes of
purchasers.'' \26\ MARS sales undertaken door-to-door compound the
concerns that either type of transaction, by itself, raises. Therefore,
the Commission is hereby clarifying that to safeguard consumers'
ability to make informed purchasing decisions in these circumstances,
the Cooling-Off Rule applies to the providers who sell mortgage
assistance relief services door-to-door.\27\
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\26\ MARS SBP, 75 FR at 75117. Similarly, the Commission has
stated that ``[h]igh-pressure sales tactics are the leading cause
for consumer complaints about door-to-door selling * * *. The door-
to-door sale, however, seems to be particularly susceptible to the
use of these tactics.'' Cooling-Off Rule SBP, 37 FR at 22937.
\27\ The record in the MARS rulemaking, including the
Commission's enforcement experience, suggests that few MARS
providers sell mortgage assistance relief services door-to-door.
Instead, the record indicates that MARS providers typically employ
other means to initiate contact with consumers. See MARS SBP, 75 FR
at 75096 (``MARS providers commonly initiate contact with
prospective consumers through Internet, radio, television, or direct
mail advertising.'') (footnote omitted).
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(3) Payment for Services Rendered During the Cooling-Off Period if the
Right to Cancel is Properly Exercised
In their comment, the Jointly Filing Consumer Groups observed that
it is not possible to return services that the seller may have chosen
to provide prior to the expiration of the three-day period and they
correctly pointed out that the Rule imposes no such requirement.\28\
The commenters requested that the Commission make clear that a consumer
who validly exercises his or her right of cancellation pursuant to the
Rule does not owe the seller for any service the
[[Page 3858]]
seller elected to perform during the cooling-off period.\29\
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\28\ Jointly Filing Consumer Groups at 6.
\29\ Id.
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The Commission has reviewed this comment and takes this opportunity
to reiterate the determination made in its Statement of Basis and
Purpose when it adopted the Rule in 1972: ``in non-emergency situations
the seller should properly bear the risk of cancellation if he elects
to perform before expiration of the cooling-off period.'' \30\ Thus,
the Commission clarifies that, except in cases covered by the Rule's
exception for emergency repairs, a buyer who validly invokes the three-
day right of rescission under the Rule is not obligated to reimburse
the seller for services performed during the cooling-off period.\31\
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\30\ Cooling-Off Rule SBP, 37 FR at 22947.
\31\ This clarification also applies in the context of a seller
who installs goods before the expiration of the three-day cooling-
off period. For example, in the context of the door-to-door sales of
home security systems, the FTC recently issued a consumer education
publication that advises consumers they have a right to cancel the
purchase even if the equipment already has been installed. ``FTC
Facts for Consumers: Knock, Knock. Who's There? Want to Buy a Home
Security System?'' (March 2011), available online at http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea18.shtm.
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(4) Continuing Right to Cancel Under the Rule if Proper Notice is Not
Given
The Jointly Filing Consumer Groups argued that in a situation where
the seller has failed to provide the required notice, the consumer
should have a continuing right to cancel. That is, the consumer should
be allowed to cancel until three days have elapsed since the consumer
received notice of the right to cancel, whenever that occurs.\32\ The
commenters stated that courts have consistently interpreted various
state cooling-off rules as including this continuing right and that
many state statutes explicitly provide this right.\33\ The commenters
pointed out that if no continuing right were provided, the seller could
deprive the consumer of her or his right to cancel simply by failing to
provide the required notice.\34\ The commenters requested that the
Commission clarify that consumers have a continuing right to cancel by
inserting a statement into the Rule at 16 CFR 429.1.\35\
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\32\ Jointly Filing Consumer Groups at 6.
\33\ Id.
\34\ Id. at 7.
\35\ Id.
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A seller theoretically could deny a consumer the right to cancel
under the Rule by failing to provide the required notice. As a
practical matter, however, the record does not indicate that this
practice currently occurs with any prevalence.\36\ Consequently, the
Commission determines that a failure of sellers to provide the required
cancellation notice is likely not sufficiently prevalent to justify
proposing additional Rule provisions at this time. As a result, the
Commission presently declines to propose modification of the Rule's
treatment of this issue.\37\ A seller who does not provide a buyer with
compliant notice of his or her right to cancel is in violation of the
Rule. The Commission, therefore, will continue its program of
monitoring, investigating, and, where appropriate, taking enforcement
against, persons who fail to comply with the Rule's notice
requirements.
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\36\ A review of complaints in the Consumer Sentinel database
reveals only a de minimis percentage of total complaints that
address a seller's noncompliance with the Rule's notice
requirements.
\37\ See 15 U.S.C. 57a(b)(3) (requiring the Commission to have
reason to believe that the practices to be addressed by a rulemaking
are ``prevalent'' before commencing a rulemaking proceeding); see
also 16 CFR 1.14(a)(1).
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With respect to those state statutes that explicitly provide a
continuing right to cancel, those state provisions would not be
preempted to the extent those provisions provide consumers with broader
protection than, and are not otherwise directly inconsistent with, the
Commission's Rule.\38\
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\38\ See 16 CFR 429.2(b).
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C. Comments Requesting Expansion of the Rule
(1) Motor Vehicle Sales at Temporary Locations
The Jointly Filing Consumer Groups requested that the Commission
remove the exemption for motor vehicle sales at temporary locations
because, they asserted, consumers at temporary sales events are
particularly susceptible to high-pressure sales tactics and
misrepresentations.\39\ The commenters requested that the exemption be
removed or, alternatively, if it is retained, that it be modified to
require the seller to inform the consumer in writing of the name of and
contact information for its permanent place of business and to permit
the seller only to hold temporary sales within 30 miles of its
permanent place of business.\40\
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\39\ Jointly Filing Consumer Groups at 8 (stating that consumers
may be lured to the sale by deception on the part of the seller,
citing how an out-of-state car dealer holding a tent sale misled
consumers into thinking it was a local dealer, and discussing high-
pressured sales tactics such as ``flipping'' a consumer from one
salesperson to another until the customer signs an agreement, often
without clearly understanding its terms). NADA, however, stated in
its comment that it is not aware of any circumstances that would
warrant expanding the Cooling-Off Rule to cover motor vehicle sales
at the place of business of a motor vehicle dealer or at temporary
business locations. NADA at 1.
\40\ Jointly Filing Consumer Groups at 9.
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In creating the exemption for sellers of automobiles at auctions,
tent sales, or other temporary places of business, the Commission
concluded that:
To the extent that certain problems occur at auto sales, they typify
the same problems that may occur at transactions at the seller's
place of business and are addressed by other Commission rules, e.g.,
the Used Car Rule and Guides on Bait and Switch, or state laws,
e.g., prohibitions of ``As is Sales.'' \41\
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\41\ See Rule on Cooling-Off Period for Door-to-Door Sales,
Final Non-Substantive Amendments and Exemptions to Sellers of
Automobiles at Auctions and Arts and Crafts at Fairs (``Exemptions
for Sellers of Automobiles at Auctions and Arts and Crafts at
Fairs''), 53 FR 45455, 45458 (Nov. 10, 1988).
Thus, while the Commission recognizes the concerns expressed by the
Jointly Filing Consumer Groups, the Commission continues to believe
that other laws more appropriately address potential problems occurring
at those venues. Accordingly, the Commission does not find sufficient
justification to propose the requested modification to the Rule at this
time. The Commission reiterates, however, that the exemption for
automobile sales will continue to be limited to sellers who have at
least one permanent place of business.\42\ The Rule will continue to
cover any itinerant automobile sellers without at least one permanent
place of business.
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\42\ Id. Moreover, at this time, there is insufficient evidence
in the record to support proposing a modification that would impose
a geographical limitation of 30 miles for sellers of used cars at
temporary locations.
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(2) Used Car Sales at Any Location
The Jointly Filing Consumer Groups request that the Commission
expand the Rule to cover used car sales at any location.\43\ They
argued that used car dealers create conditions, such as forcing
consumers to stay in the dealership for long periods of time by keeping
the potential trade-in or the consumer's driver's license, or using
other ruses, which are equivalent to a salesperson keeping a buyer
captive in his or her home, if not worse.\44\ The commenters stated
that, in contrast to new car sales, used car sales have a higher risk
of misrepresentations and sales at a much higher price than the used
car is worth.\45\ The commenters
[[Page 3859]]
also noted that low-income consumers are especially vulnerable to
dealer abuses in the used car market.\46\ In addition, the commenters
cited certain safety risks with used cars sold ``as is,'' and cite to
the selling of used flood-damaged cars without disclosure of the car's
condition.\47\ The commenters believe that the right of cancellation
under the Cooling-Off Rule is necessary to combat these issues,
particularly given the magnitude and importance of a car purchase for
most consumers.\48\
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\43\ Jointly Filing Consumer Groups at 9.
\44\ Id. at 11.
\45\ Id. The commenters cite to a practice in which a dealer
steers borrowers toward more expensive loans in exchange for a
kickback from the automobile financing lender. The commenters also
describe a practice called ``yo-yo'' sales, in which a dealer offers
an attractive interest rate to a consumer, allows the consumer to
drive the car home, and later contacts the consumer to say that the
financing could not be arranged at the original terms in order to
impose on the consumer a higher interest rate or less favorable
terms. Id. at 12.
\46\ Id. at 11.
\47\ Id. at 12.
\48\ Id. The commenters also discuss their interpretation of a
European Union directive that gives ``consumers 14 days to withdraw
from essentially any transaction based on credit for any reason.
Council Directive 2008/48/EC, art. 14, 2008 O.J. (L 133/66 (EC). It
appears as if cars purchased on credit--which most are--are
included.'' Id. at 10.
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The Commission has never intended for the Rule to be construed so
broadly as to apply to used car sales at a dealer's premises. In its
Federal Register notice announcing that sales of automobiles at
temporary places of business are exempt from the Rule, the Commission
stated that:
Although the Rule is primarily directed toward door-to-door sales,
the Commission was also concerned with itinerant salesmen who sell
at restaurants, shops and other places, and with the possibility
that salespeople would attempt to evade the Rule's application by
luring consumers outside the home by subterfuge. The Commission
therefore broadened the definition of a ``door-to-door'' sale to
include those sales made away from the seller's place of
business.\49\
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\49\ Exemptions for Sellers of Automobiles at Auctions and Arts
and Crafts at Fairs, 53 FR at 45458.
The Rule is tailored to remedy practices associated with sales that
occur in settings other than the seller's place of business.
Modification of the Rule to cover at-premises sales would go beyond the
scope of what the Rule is intended to cover.
Additionally, in many instances, disclosures required by other
Commission rules, such as the Used Car Rule, adequately address the
concerns identified by the commenters. For example, the Buyers Guide
provision under the Used Car Rule requires dealers to disclose to
consumers: Whether the vehicle is being sold ``as is'' or with a
warranty; what percentage of the repair costs a dealer will pay under
warranty; information about the car's major mechanical and electrical
systems, as well as any major potential problems; and that consumers
can ask to have the car inspected by an independent mechanic before
buying.\50\
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\50\ 16 CFR 455.2(a)-(b).
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With respect to other potential issues involving car dealers, in
2011, the Commission conducted a series of public roundtables to gather
information on consumers' experiences in the sales, financing, and
leasing of motor vehicles at dealerships. The information will help the
Commission determine what, if any, future actions would be appropriate,
such as specific enforcement initiatives, increased consumer and
business education, promulgating rules, or other action.\51\
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\51\ See Public Roundtables: Protecting Consumers in the Sale
and Leasing of Motor Vehicles, Notice Announcing Public Roundtables
Regarding Public Participation, and Providing Opportunity for
Comment, 76 FR 14014 (Mar. 15, 2011), available at http://www.gpo.gov/fdsys/pkg/FR-2011-03-15/pdf/2011-5873.pdf; see also
http://www.ftc.gov/bcp/workshops/motorvehicles. Public comments
filed regarding these motor vehicle sales, financing and leasing
issues are available at http://www.ftc.gov/os/comments/motorvehicleroundtable/index.shtm.
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(3) Online Payday Lending
The Jointly Filing Consumer Groups requested that the Commission
expand the Rule to include transactions with online payday lenders.\52\
These commenters argued that online payday lenders use aggressive
techniques that are similar to the practices of door-to-door
salespersons.\53\ They stated that consumers accessing payday loans are
generally low-income consumers without access to more regulated,
legitimate lines of credit or loans.\54\ These consumers are vulnerable
to the misrepresentations made by payday lenders, who frequently do not
make the actual cost of loans clear.\55\ Consumers who get payday loans
online, they argued, are particularly vulnerable because these online
providers do not disclose their physical place of business, if any, or
make clear any state where they purport to be licensed.\56\ The
commenters also stated that the industry aggressively seeks to make
personal contact with consumers by sending email messages to them
promising immediate loans, without always making clear that the email
messages are advertisements.\57\
---------------------------------------------------------------------------
\52\ Jointly Filing Consumer Groups at 13.
\53\ Id.
\54\ Id.
\55\ Id.
\56\ Id.
\57\ Id.
---------------------------------------------------------------------------
In the Commission's experience, consumers in typical online payday
loan transactions receive cash in exchange for their personal checks or
authorization to debit their bank accounts, and lenders and consumers
agree that consumers' checks will not be cashed or their accounts
debited until a designated future date. Online payday loans have high
fees and short repayment periods, which translate to high annual rates,
and they often are due on the borrower's next payday, usually within
about two weeks. The Commission determines that the Cooling-Off Rule is
not designed to address online payday loan transactions, but notes that
other protections for consumers are available. For example, the federal
Truth in Lending Act (``TILA'') treats payday loans like other types of
credit. Under TILA, and its implementing Regulation Z, those who
advertise the specific cost of credit must disclose the annual
percentage rate (``APR'') of the loans to help consumers make better-
informed decisions, including assisting them in comparison shopping
among loans.
To the extent that payday lenders aggressively seek to make
personal contact with consumers by sending email messages, additional
protections could apply under the Controlling the Assault of Non-
Solicited Pornography And Marketing Act (the ``CAN-SPAM Act''). For
example, the CAN-SPAM Act requires a sender of an unsolicited
commercial email message to clearly and conspicuously disclose that the
message is an advertisement and to provide consumers with a way to opt-
out of receiving unwanted email messages from the sender in the
future.\58\
---------------------------------------------------------------------------
\58\ 15 U.S.C. 7704(a)(3) and (a)(5).
---------------------------------------------------------------------------
In addition, the FTC has jurisdiction to bring enforcement actions
under Section 5 of the FTC Act, 15 U.S.C. 45, for unfair and deceptive
acts or practices in the payday lending industry. The Commission has
brought several such actions, mostly stemming from either deceptive
representations made by payday lenders or unfair practices regarding
the collection of payday loans.\59\
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\59\ See, e.g., FTC v. Loanpointe, LLC, Case No. 2:10-CV-00225
(D. Utah 2010) (the Commission brought Section 5 and Fair Debt
Collection Practices Act claims alleging that the lender falsely
claimed an entitlement to garnish wages, falsely claimed they
informed debtors that their wages would be garnished, and disclosed
information about debts to third parties); FTC v. Virtual Works,
LLC, Case No. C09-03815 (N.D. Cal. 2009) (the Commission alleged
that the defendants violated Section 5 by deceiving payday borrowers
into purchasing offered debit cards for a fee); FTC and State of
Nevada v. Cash Today, Ltd., Case No. 3:08-CV-00590-BES-VPC (D. Nev.
2008) (the Commission alleged that the defendants violated Section 5
by falsely claiming that consumers were legally obligated to pay
debts when they were not, falsely threatening consumers with arrest
or imprisonment, repeatedly calling consumers at work, using abusive
and profane language, and disclosing debts to third parties).
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[[Page 3860]]
D. Comment Requesting Exemption for Truck Sales of Perishable Food
One commenter requested that the Commission exempt from the Rule
sales of perishable food from trucks parked at ``fixed locations.''
\60\ The commenter stated that his business periodically sells fresh
seafood in such a manner in various cities and towns throughout the
country. He noted that the business does not accept credit cards, nor
does it enter into any contracts with consumers for future
delivery.\61\
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\60\ Fabian Seafood Company at 1.
\61\ The commenter also expresses concern that ``[a]ccording to
the present rules, a customer can purchase $100 in fresh seafood,
cancel the sale within 3 days for no reason, get a refund from us,
and then, since we will not return to the customer's city for 3-4
weeks to retrieve the seafood, the customer may then just keep the
seafood.'' Id. The comment, however, does not cite examples of this
actually happening, and the proposed change in the exclusionary
limit identified in Sec. 429.0 from $25 to $130 may moot this
concern for many transactions.
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The Rule generally covers businesses that sell consumer goods from
trucks or other temporary locations (such as fairgrounds or convention
centers).\62\ Sales at temporary locations, like sales in consumers'
homes, can involve techniques that prompted the Commission to adopt the
Rule in 1972 (discussed at note 5, supra). These types of sales, for
example, may involve high-pressure sales tactics, misrepresentations
about the price, quality, and characteristics of the products, and high
prices for low quality merchandise. In the absence of other
protections, consumers purchasing from sellers at temporary locations
also can face challenges locating those sellers after their
transactions to seek recourse if there are problems. Nothing in the
record or the Commission's experience indicates that these techniques
are less of a concern now than they were in 1972. Consequently, the
Commission declines to propose an exemption for truck-based sales.
---------------------------------------------------------------------------
\62\ See 16 CFR 429.0(a).
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E. Comments Concerning Increase in $25 Exclusionary Limit to $130 to
Reflect Inflation
In its comment, DSA requested that the Commission increase the
Rule's $25 exclusionary limit to one that reflects inflation since the
Rule's enactment.\63\ The Jointly Filing Consumer Groups, however,
stated that because transactions of $25 or more can result in financial
over-extension for many consumers, the Rule's current exclusionary
limit should be maintained without adjustment for inflation.\64\
---------------------------------------------------------------------------
\63\ DSA at 5.
\64\ Jointly Filing Consumer Groups at 4.
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Based on its review of these comments and the Commission's
regulatory and enforcement experience as a whole, the Commission has
determined to seek public comment on a proposed increase in the Rule's
exempted amount \65\ to $130. The proposed increase in the Rule's
exclusionary limit would exempt a seller only with regard to a sale,
lease, or rental of consumer goods or services, with a purchase price
below $130 whether under single or multiple contracts.\66\
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\65\ 16 CFR 429.0
\66\ The Rule would continue to cover a seller's transactions
that are valued above the proposed revised exempted amount of $130
or more. A seller would be exempt from the Rule only to the extent
that a particular transaction, whether under single or multiple
contracts, falls below the proposed revised minimum dollar amount of
$130.
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Under Section 18(g)(2) of the FTC Act, the Commission may on its
own motion, or in response to a petition, provide for exemptions from
the operation of trade regulation rules if the Commission finds that
the application of the rule to persons or a class of persons is not
necessary to prevent the unfair or deceptive act or practice to which
the rule relates.\67\ Section 18 provides that procedures under the
Administrative Procedure Act, 5 U.S.C. 553, shall apply in proceedings
to consider such an exemption.\68\
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\67\ 15 U.S.C. 57a(g)(2).
\68\ Id. The Commission has previously used this exemption
authority to exempt sales of autos at public auctions by established
companies and sales at arts and craft fairs from the operation of
the Rule. 53 FR 45455; see also 16 CFR 429.3.
---------------------------------------------------------------------------
The Commission tentatively concludes that an increase in the
exclusionary amount is warranted because application of the Rule to
sellers of goods priced below $130 appears unnecessary to prevent the
unfair or deceptive practices addressed by the Rule. Currently, the
Rule, in part, defines a door-to-door sale as a sale, lease, or rental
of consumer goods or services with a purchase price of $25 or more,
whether under single or multiple contracts. The $25 exempted dollar
amount has remained unchanged for four decades since the Commission
promulgated the Rule in 1972. Based on changes in the most general
consumer price index, an item that cost $25 in 1972 would cost
approximately $130 today.\69\
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\69\ The average value of the CPI-U for 2010 was 218.056, while
the average value for 1972 was 41.8. See U.S. Department of Labor,
Bureau of Labor Statistics, ``Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items,'' available at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt, visited Oct. 1,
2012. Dividing 218.056 by 41.8 gives a value of 5.217 and
multiplying this figure by $25 gives a value of $130.43. Rounding
down to $130 yields the proposed new minimum dollar amount.
---------------------------------------------------------------------------
Given this data, the Commission is seeking comment on a proposed
increase in the exclusionary limit from $25 to $130. By accounting for
inflation, this increase of the exempted dollar amount could balance
compliance costs and consumer benefits in today's marketplace in a
manner that is consistent with the exclusionary limit originally
established at the Rule's promulgation in the early 1970s.\70\ The
Commission specifically seeks comment on:
---------------------------------------------------------------------------
\70\ See also Cooling-Off Rule SBP, 37 FR at 22946 (``In
deciding that the $10 exclusion in the proposed rule should be
increased to $25, the Commission was persuaded by the fact that a
door-to-door salesman could not long survive if his livelihood
depended upon the expenditure of very much time and effort to make a
sale of under $25. Sales for less than that amount simply would not
justify the use of a lengthy high-pressure sales pitch which has
been identified as the most prevalent source of complaints regarding
door-to-door sales. Virtually all of the examples of the sort of
sales which outraged consumers were for amounts substantially in
excess of $25.'').
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1. Whether the Rule's $25 exclusionary limit should be increased to
account for inflation since the Rule was first promulgated in 1972 and
to exempt from the Rule's coverage sales, leases, or rentals of
consumer goods or services with a purchase price of less than $130,
whether under single or multiple contracts;
2. What types of transactions would become exempt from the Rule as
a consequence of the increase;
3. Whether transactions intended to be covered by the Rule when
originally adopted in 1972 would become exempt as a result of the
increase;
4. How the increase would impact the benefits the Rule currently
provides to consumers and commerce;
5. How the increase would impact the burdens or costs the Rule
currently imposes on sellers subject to the Rule's requirements; and
6. Whether the increase would impact the enforcement of state laws
and municipal ordinances.
F. Comments Proposing Modifications That Would Affect Contractual
Provisions in Agreements Between Buyers and Sellers in Door-to-Door
Transactions
(1) Arbitration Agreements
The Jointly Filing Consumer Groups argued that the Rule should
expressly prohibit arbitration agreements because they believe sellers
may try to insulate themselves from liability for abusive practices
associated with door-to-door
[[Page 3861]]
sales through the use of arbitration clauses.\71\ The commenters
described the potential for abuse by sellers using arbitration
agreements, but 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 a provision addressing the
use of arbitration agreements.\72\ Consequently, the Commission
declines to propose modification of the Rule to address the use of
arbitration provisions in agreements between door-to-door sellers and
their customers.
---------------------------------------------------------------------------
\71\ Jointly Filing Consumer Groups at 14.
\72\ The Commission, however, is cognizant of concerns about
arbitration provisions in general and in particular as they relate
to debt collection agreements. See, e.g., Federal Trade Commission,
Repairing a Broken System: Protecting Consumers in Debt Collection
Litigation and Arbitration (July 2010), available at http://www.ftc.gov/os/2010/07/debtcollectionreport.pdf.
---------------------------------------------------------------------------
(2) An Independent Contractual Provision Stating That the Consumer Has
the Right To Cancel Pursuant to the Terms of the Notice
The Jointly Filing Consumer Groups requested that the Commission
amend the Rule to require sellers to include a contractual provision
which states that consumers have the right to cancel pursuant to the
terms of the cancellation notice.\73\ This provision, they argued,
would enable consumers to access the ``full range of options for
redress available under contract law.'' \74\ The commenters, however,
did not present any evidence to suggest that the absence of such a
provision has in any way impinged upon consumers' ability to exercise
their rights against sellers under this Rule. The Rule provides
consumers a three-day cooling off period for door-to-door sales and
requires sellers to provide clear disclosures regarding a consumer's
right to cancel. Specifically, the Rule requires the following
statement on the contract itself in immediate proximity to the
signature lines (or on the front page of the receipt if no contract is
used): ``You, the buyer, may cancel this transaction at any time prior
to midnight of the third business day after the date of this
transaction. See the attached notice of cancellation form for an
explanation of this right.'' \75\ The commenters did not explain how
this provision falls short in protecting consumers' rights under the
Rule. It is a violation of the Rule to fail or refuse to honor any
valid notice of cancellation by a buyer.\76\ The Commission will
continue to monitor, investigate, and, where appropriate, take
enforcement action for violations of the Rule. Accordingly, due to the
lack of evidentiary support indicating that the Rule's current
requirements are insufficient to protect consumers' ability to exercise
their rights under the Rule, the Commission declines to propose further
modifications to the Rule to mandate that sellers include an additional
contract provision stating that buyers have the right to cancel
pursuant to the terms of the cancellation notice.
---------------------------------------------------------------------------
\73\ Jointly Filing Consumer Groups at 15.
\74\ Id.
\75\ 16 CFR 429.1.
\76\ 16 CFR 429.1(g).
---------------------------------------------------------------------------
G. Comments Proposing Modifications to Requirements for Effecting
Cancellation
(1) Alternative Compliance for Companies That Offer 100% Money-Back
Guarantees
DSA argued that many DSA member companies offer 100% money-back
guarantees or longer periods of rescission than required by the
Rule.\77\ DSA recommended that companies be allowed to substitute the
language giving notice of these protections for that of the Cooling-Off
Rule.\78\ DSA asserted that permitting such alternative compliance
would reduce costs associated with printing and administering the
cooling-off notice and reduce costs associated with training both home-
office personnel and independent sellers.\79\ In its Statement of Basis
and Purpose that accompanied the Rule in 1972, the Commission stated:
---------------------------------------------------------------------------
\77\ DSA at 3.
\78\ Id.
\79\ Id.
Adoption of a provision which would exclude from applicability
of the rule sellers who provide a money-back guarantee would
increase the enforcement problems associated with the rule to a
point that the rule would be almost ineffectual. Every direct seller
who desired such an exclusion would claim he offered such guarantee.
Then the Commission would be confronted with a neverending problem
of determining whether the seller in fact gave such a guarantee and
whether he performed his obligations under it. One of the principal
advantages of the cooling-off rule is that it is self-enforcing. The
consumer is given the unilateral right to cancel the sale. Its
effectiveness does not depend upon whether a branch representative
or subordinate manager understands the meaning and effect of a
guarantee, or even upon his willingness to honor such a
guarantee.\80\
---------------------------------------------------------------------------
\80\ Cooling-Off Rule SBP, 37 FR at 22948.
The commenter advanced no compelling reason to revisit this issue.
It is still the case that enforceability problems associated with 100%
money-back guarantees would undermine the self-enforcing nature of the
Cooling-Off Rule. The Commission, therefore, declines to propose
modification of the Rule to allow an alternative compliance scheme for
companies that offer 100% money-back guarantees or longer periods of
rescission.
(2) Duplicate Notice Requirement
DSA requested that the Commission eliminate the Rule's duplicate
notice requirement.\81\ DSA contended that there is virtually an
automatic record of sales and cancellations in most transactions and
that when paper cancellations are made, the almost universal access to
copier machines makes the duplicate notice superfluous.\82\ DSA argued
further that reducing the duplicate notice requirement would reduce
environmental waste.\83\
---------------------------------------------------------------------------
\81\ DSA at 4.
\82\ Id.
\83\ Id.
---------------------------------------------------------------------------
The Rule provides in part that sellers must furnish each buyer, at
the time the buyer signs the door-to-door sales contract or otherwise
agrees to buy consumer goods or services from the seller, a completed
form, in duplicate, captioned either ``NOTICE OF RIGHT TO CANCEL'' or
``NOTICE OF CANCELLATION.'' \84\ The requirement that this notice be
provided in duplicate is to ensure that consumers desiring to cancel
their transactions have both a copy of the notice to return to sellers
to effect the cancellation and a copy to keep. In earlier proceedings,
the Commission clarified that sellers could comply with this provision
by, for example, using a contract or receipt with the reverse side
containing one ``Notice of Cancellation'' and an attached ``Notice'' to
be used by the buyer should the buyer decide to cancel.\85\ The
Commission also stated that another alternative method of complying
with the duplicate notice requirement would be for the seller to give
the buyer two copies of the contract or receipt with both having the
notice on the reverse side of the contract or receipt.\86\ The
Commission continues to believe that:
---------------------------------------------------------------------------
\84\ 16 CFR 429.1(b).
\85\ Exemptions to Sellers of Automobiles at Auctions and Arts
and Crafts at Fairs, 53 FR at 45457.
\86\ Id.
by providing the seller with increased flexibility in complying with
the duplicate notice provisions of the Rule, the policy objectives
of those provisions will be attained at a lower cost (including
paperwork-related
[[Page 3862]]
costs) to the seller and ultimately to the consumer.\87\
---------------------------------------------------------------------------
\87\ Id.
The Commission believes that the flexible duplicate notice
requirement avoids imposing additional expense on, and time required
of, those consumers who would need to access copier machines in order
to preserve a record of their right to cancel. The Commission further
believes that this burden on consumers would likely exceed the
potential benefits of reducing environmental waste that DSA claims
would be achieved by eliminating the duplicate receipt requirement.
Consequently, the Commission declines to propose elimination of the
duplicate notice requirement.
(3) Phone Cancellations
One commenter argued that the Commission should permit phone
cancellations under the Rule.\88\ During the Commission's promulgation
of the Rule in 1972, both industry and consumer representatives opposed
permitting oral cancellations due to the potential difficulty that
would arise as to whether the buyer had actually exercised his or her
right of cancellation.\89\ Consumer groups responded that salesmen who
frequent impoverished neighborhoods would simply disregard oral
cancellations and that the method would not be of any real assistance
to those who were expected to benefit from it.\90\ The Commission found
at that time that the possibility of confusion and uncertainty were
sufficiently great to warrant rejection of a Rule provision permitting
oral cancellations.\91\ The concerns expressed by the Commission at
that time appear to remain unchanged and the current record does not
reflect any evidence to the contrary. For these reasons, the Commission
declines to propose permitting the use of phone cancellations.
---------------------------------------------------------------------------
\88\ Yohanek at 1.
\89\ Cooling-Off Rule SBP, 37 FR at 22950.
\90\ Id.
\91\ Id.
---------------------------------------------------------------------------
H. Comments Proposing That the Commission Study the Language of the
Cancellation Notice and Modify the Notice's Font Size
DSA argued that the Commission should conduct a study to determine
the efficacy of the language in the Rule's cancellation notice because,
in their view, the notice uses too many words to convey the buyer's
rights.\92\ However, DSA offered no evidence tending to show that the
language is burdensome on businesses or confusing to consumers, or that
any other issue exists that would warrant an examination of the
notice's efficacy.
---------------------------------------------------------------------------
\92\ DSA at 5.
---------------------------------------------------------------------------
Moreover, during its 1988 regulatory review concerning the Cooling-
Off Rule, the Commission recognized that sellers should have the option
of shortening the notice by eliminating sections that are inapplicable
to a particular transaction. The Commission determined that much of the
mandatory language in the notice may not apply to many direct sales
because they do not involve, for example, traded-in property,
negotiable instruments, or property being delivered prior to the
expiration of the three day cooling-off period. As a result, the
Commission then amended the Rule by giving sellers the option to
shorten the notice by eliminating sections that are inapplicable to a
particular transaction.\93\ The Commission stated that its amendment
would reduce paperwork and related costs incurred by sellers in
complying with the Rule and benefit consumers by increasing the
likelihood of consumers reading and understanding key provisions of all
documents.\94\
---------------------------------------------------------------------------
\93\ Exemptions for Sellers of Automobiles at Auctions and Arts
and Crafts at Fairs, 53 FR at 45457.
\94\ Id.
---------------------------------------------------------------------------
In addition, the Jointly Filing Consumer Groups argued that the
Rule's 10 point font size should be increased.\95\ These commenters
argued that in light of the range of font options available with
today's word-processing technology, a font size of 10 may be too
small.\96\ They cited a study which concluded that an 11 to 14 point
font size should be used regardless of one's audience.\97\ These
commenters recommended increasing the minimum font size to at least 12
points.\98\
---------------------------------------------------------------------------
\95\ Jointly Filing Consumer Groups at 15.
\96\ Id.
\97\ Id. According to the commenters, the study is a final class
project submitted by a graduate student who is pursuing a Master's
Degree in the subject of Information Science.
\98\ Id.
---------------------------------------------------------------------------
The Rule states that sellers should use bold face type in a minimum
size of 10 points.\99\ The Commission agrees that whenever possible, an
appropriate larger font size should be used in sellers' cancellation
notices. However, there is no evidence on the record indicating that
buyers are having any widespread problems reading or understanding
sellers' cancellation notices due to the minimum font size requirement.
Accordingly, the Commission declines to propose modification of the
Rule's minimum font size requirement at this time.
---------------------------------------------------------------------------
\99\ 16 CFR 429.1(a).
---------------------------------------------------------------------------
I. Suggestion To Preempt All State Cooling-Off Regulations
DSA argued that a complete preemption of all state and municipal
cooling-off ordinances is warranted in the case of the Cooling-Off Rule
because requiring different standards for different states is an
unjustified burden on businesses and confusing to consumers with little
to no benefit.\100\ They argued that the Commission's Cooling-Off Rule
is sufficient protection and should be uniformly used by all companies
in all U.S. jurisdictions.\101\
---------------------------------------------------------------------------
\100\ DSA at 5.
\101\ Id.
---------------------------------------------------------------------------
The Commission believes there is no valid rationale for complete
preemption of all state and municipal cooling-off rules. As stated in
the Commission's 1972 Statement of Basis and Purpose: ``If the State
cooling-off laws give the consumer greater benefit and protection in
regard to notice, time for election of the cancellation remedy, or in
transactions exempted from this rule, there seems to be no reason to
deprive the affected consumers of these benefits.'' \102\ Moreover, the
record continues to support the view that ``the joint and coordinated
efforts of both the Commission and State and local officials are
required to insure that consumers who have purchased from a door-to-
door seller something they do not want, do not need, or cannot afford,
be accorded a unilateral right to rescind, without penalty, their
agreements to purchase those goods or services.'' \103\ Additionally,
state laws governing door-to-door transactions hold particular
importance given the local nature of these types of transactions.
Accordingly, the Commission declines to propose to adopt a provision
preempting all state-cooling off regulations.
---------------------------------------------------------------------------
\102\ Cooling-Off Rule SBP, 37 FR at 22958.
\103\ 16 CFR 429.2(a).
---------------------------------------------------------------------------
IV. Instructions for Comment Submissions
The Cooling-Off Rule currently excludes from the Rule's coverage
sales, leases, or rentals of consumer goods or services with a purchase
price of $25 or less, whether under single or multiple contracts.\104\
Through the instant proceeding, the Commission requests comment on a
proposed increase of this exclusionary limit to $130 to account for
inflation since the exempted dollar amount was established in
1972.\105\
---------------------------------------------------------------------------
\104\ 16 CFR 429.0.
\105\ See supra Section III. E.
---------------------------------------------------------------------------
The Commission invites interested persons to submit written
comments on
[[Page 3863]]
any issue of fact, law, or policy that may bear upon the proposals
under consideration. Please include explanations for any answers
provided, as well as supporting evidence where appropriate. After
examining the comments, the Commission will determine whether to issue
specific amendments.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before March 4, 2013.
Write ``Cooling-Off Rule Regulatory Review, 16 CFR 429, Comment,
Project No. P087109'' on your comment. Your comment--including your
name and your state--will be placed on the public record of this
proceeding, including, to the extent practicable, on the public
Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a
matter of discretion, the Commission tries to remove individuals' home
contact information from comments before placing them on the Commission
Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment doesn't include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment doesn't include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, don't
include any ``[t]rade secret or any commercial or financial information
* * * which is privileged or confidential,'' as provided in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\106\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
---------------------------------------------------------------------------
\106\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
---------------------------------------------------------------------------
Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/coolingoffproposedamend, by following the instructions on the web-
based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
If you file your comment on paper, write ``Cooling-Off Rule
Regulatory Review, 16 CFR 429, Comment, Project No. P087109'' on your
comment and on the envelope, and mail or deliver it to the following
address: Federal Trade Commission, Office of the Secretary, Room H-113
(Annex C), 600 Pennsylvania Avenue NW., Washington, DC 20580. If
possible, submit your paper comment to the Commission by courier or
overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before March 4, 2013. You can find more information,
including routine uses permitted by the Privacy Act, in the
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
V. Regulatory Analysis and Regulatory Flexibility Act
Under Section 22 of the FTC Act, 15 U.S.C. 57b, the Commission must
issue a regulatory analysis for a proceeding to amend a rule only when
it: (1) Estimates that the amendment will have an annual effect on the
national economy of $100,000,000 or more; (2) estimates that the
amendment will cause a substantial change in the cost or price of
certain categories of goods or services; or (3) otherwise determines
that the amendment will have a significant effect upon covered entities
or upon consumers.
The Commission believes the amendments will have no significant
economic or other impact on the economy, prices, or regulated entities
or consumers. The proposed Rule would merely increase the Rule's
exclusionary limit to take into account inflation since the Rule's
promulgation in 1972. Sellers of many goods previously covered by the
Rule will experience a reduction in their compliance burden. As such,
the economic impact of the final Rule will be minimal.
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-612,
requires an agency to provide an Initial Regulatory Flexibility
Analysis (``IRFA'') with a proposed rule and a Final Regulatory
Flexibility Analysis (``FRFA'') with the final rule, if any, unless the
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities.\107\ For the reasons
stated above, the FTC does not expect that the final Rule will have a
significant economic impact on a substantial number of small entities.
The proposed Rule would exempt many small entities from the Rule's
requirements when they engage in transactions valued below $130.
Accordingly, the Commission hereby certifies that this proposed Rule
will not have a significant economic impact on a substantial number of
small entities as they are defined in the Regulatory Flexibility Act, 5
U.S.C. 601-612.
---------------------------------------------------------------------------
\107\ 5 U.S.C. 603-605.
---------------------------------------------------------------------------
The Rule applies to sellers of goods and services, including small
entities, who make sales at a place other than the place of business of
the seller (e.g., buyer's home, workplace or dormitory, or at
facilities rented by the seller on a temporary or short-term basis,
such as hotel or motel rooms, convention centers, fairgrounds and
restaurants). Under the Small Business Size Standards issued by the
Small Business Administration, retail sellers and service providers
generally qualify as small businesses if their sales are less than $7.0
million annually.\108\
---------------------------------------------------------------------------
\108\ See http://www.sba.gov/content/summary-size-standards-industry.
---------------------------------------------------------------------------
The proposed Rule is intended to reduce burdens on these small
entities by exempting transactions valued at less than $130 from the
Rule's coverage. The proposed amendment does not expand the coverage of
the Rule in a way that would affect small businesses.
Pursuant to 5 U.S.C. 605(b), this proposed Rule, therefore, is
exempt from the initial and final regulatory flexibility analyses
requirements of sections 603 and 604. This document serves as notice to
the Small Business Administration of the agency's certification of no
significant impact.
VI. Paperwork Reduction Act
The Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501 et seq.,
requires government agencies, before promulgating rules or other
regulations that require ``collections of information''
[[Page 3864]]
(i.e., recordkeeping, reporting, or third-party disclosure
requirements), to obtain approval from the Office of Management and
Budget (``OMB''). The amendment will not impose collection
requirements, so OMB approval is unnecessary.
VII. Communications by Outside Parties to the Commissioners or Their
Advisors
Written communications and summaries or transcripts of oral
communications respecting the merits of this proceeding from any
outside party to any Commissioner or Commissioner's advisor will be
placed on the public record.
List of Subjects in 16 CFR Part 429
Sales Made at Homes or at Certain Other Locations; Trade practices.
For the reasons stated in the preamble, the Federal Trade
Commission proposes to amend part 429 of title 16, Code of Federal
Regulations, as follows:
0
1. The authority citation for 16 CFR parts 429 is revised to read as
follows:
Authority: 15 U.S.C. 41 et seq.
0
2. Amend Sec. 429.0, by revising the introductory text of paragraph
(a) to read as follows:
Sec. 429.0 Definitions
* * * * *
(a) Door-to-Door sale--A sale, lease, or rental of consumer goods
or services with a purchase price of $130 or more, whether under single
or multiple contracts, in which the seller or his representative
personally solicits the sale, including those in response to or
following an invitation by the buyer, and the buyer's agreement or
offer to purchase is 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 basis, such as hotel or motel rooms, convention
centers, fairgrounds and restaurants, or sales at the buyer's workplace
or in dormitory lounges). The term door-to-door sale does not include a
transaction:
* * * * *
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2012-31558 Filed 1-16-13; 8:45 am]
BILLING CODE 6750-01-P