The Most Ignored FTC Rule in the Live Event/Seminar Industry
The seminar or conference setting to deliver content and sell additional training, products and services is a well-known, popular and “bread and butter” direct marketing strategy. Amazingly, speakers at these events are almost uniformly non-compliant (except my clients, of course!) with the Federal Trade Commission Trade Regulation Rule Concerning A Cooling-Off Period For Door-to-Door Sales — otherwise known as the “3 Day Rule.”
The FTC Rule provides that in connection with any “door-to-door” sale, the seller of consumer goods or services must provide in its contract for a three day “cooling-off” period. Thus, a purchaser of goods or services sold in a “door-to-door” sale has the right to rescind the transaction at any time during the three days following the sale.
The focus and purpose of the Rule was to combat the high pressure sales techniques of door-to-door salesmen. The dynamics of closing sales at a customer’s home was found, during the hearings held by the FTC, to be ripe for overreaching and unfairness. Curiously, rule does not limit itself to sales made within a customer’s residence. Rather the focus is on sales made away from a sellers place of business. It was the potential abuses from the “personal contact” between the seller and consumer in a “nonbusiness setting” that was the target of the Rule.
The FTC stated, after reviewing the effects of similar state laws and the favorable comments of industry groups that:
The three day cooling off period will provide the consumer with an opportunity to discuss his purchase with others, to reflect upon the provisions of the contract, and perhaps to do a little comparative shopping. This will give him some opportunity to discover misrepresentations made by the salesman, or to realize either that he is paying too high a price for the product or that he simply didn’t know when he agreed to buy what he was being asked to pay. (Fed Reg at 222942)
Further, the focus of the Rule, sales made at a place other than the place of business of the seller, was intended to cover as broad a class of direct sellers as possible – including sales made at conferences and seminars conducting at hotels and conference centers.
The definition of “consumer goods” was drafted to specifically include courses of instruction or training regardless of the purpose for which they are taken.
The Rule states that in connection with any door-to-door sale it constitutes an unfair and deceptive act or practice for any seller to fail to tender a completed contract with the following language in boldface 10 point type:
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 FOR AN EXPLANATION OF THIS RIGHT.
and a completed form in duplicate entitled “Notice of Cancellation” or “Notice of Right of Cancellation” that includes the following specified language:
YOU MAY CANCEL THIS TRANSACTION WITHOUT ANY PENALTY OR OBLIGATION, WITHIN THREE BUSINESS DAYS FROM THE ABOVE DATE.
IF YOU CANCEL, ANY PROPERTY TRADED IN, ANY PAYMENTS MADE BY YOU UNDER THE CONTRACT OR SALE, AND ANY NEGOTIABLE INSTRUMENT EXECUTED BY YOU WILL BE RETURNED WITHIN 10 BUSINESS DAYS FOLLOWING RECEIPT BY THE SELLER OF YOUR CANCELLATION NOTICE, AND ANY SECURITY INTEREST ARISING OUT OF THE TRANSACTION WILL BE CANCELED.
IF YOU CANCEL, YOU MUST MAKE AVAILABLE TO THE SELLER AT YOUR RESIDENCE, IN SUBSTANTIALLY AS GOOD CONDITION AS WHEN RECEIVED, ANY GOODS DELIVERED TO YOU UNDER THIS CONTRACT OR SALE; OR YOU MAY IF YOU WISH, COMPLY WITH THE INSTRUCTIONS OF THE SELLER REGARDING THE RETURN SHIPMENT OF THE GOODS AT THE SELLER’S EXPENSE AND RISK. IF YOU DO MAKE THE GOODS AVAILABLE TO THE SELLER AND THE SELLER DOES NOT PICK THEM UP WITHIN 20 DAYS OF THE DATE OF YOUR NOTICE OF CANCELLATION, YOU MAY RETAIN OR DISPOSE OF THE GOODS WITHOUT ANY FURTHER OBLIGATION. IF YOU FAIL TO MAKE THE GOODS AVAILABLE TO THE SELLER, OR IF YOU AGREE TO RETURN THE GOODS TO THE SELLER AND FAIL TO DO SO, THEN YOU REMAIN LIABLE FOR THE PERFORMANCE OF ALL OBLIGATIONS UNDER THE CONTRACT.
TO CANCEL THIS TRANSACTION, MAIL OR DELIVER A SIGNED AND DATED COPY OF THIS CANCELLATION NOTICE OR ANY OTHER WRITTEN NOTICE, OR SEND A TELEGRAM TO (NAME OF SELLER) AT (ADDRESS OF SELLER’S BUSINESS)
I HEREBY CANCEL THIS TRANSACTION.
Adding to the mix are the numerous state laws that duplicate the 3 day right of rescission.
What’s your risk? Refunds of all sales made without the disclosure.
How do you comply? Easy – include the one paragraph disclosure above (“You the buyer…” on the front of your sales form, and the longer boiler plate on the back and use a carbonless triplicate form. Fill it in and give your customer a completed form.
For those of you who will argue that this will affect sales, I beg to differ. Disclaimers and disclosures will have zero effect on sales but failing to comply can and will empty your wallets.