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Federal Deception Law: 2.5.4.5 Mail and Telephone Sales

Transactions conducted and consummated entirely by mail or telephone and without other contact between the buyer and seller prior to delivery of goods or services are explicitly excluded from coverage under the Cooling-Off Rule.346 If there is other contact with the buyer, however, this exception does not apply.347 Note that state telemarketing laws may provide buyers the right to cancel a telephone sale, even though the Cooling-Off Rule does not.348

Federal Deception Law: 2.5.4.6 Leases, Rent-to-Own Transactions, Transactions Under $25 or $130

The FTC’s Cooling-Off Rule explicitly applies to leases and rentals of consumer goods.349 The Cooling-Off Rule’s Statement of Basis and Purpose explains that the rule was drafted to make it clear that leases were covered so that door-to-door sellers could not escape the rule by leasing their goods instead of selling them.350 The rule may thus provide an often overlooked way to challenge “rent-to-own” appliance transactions, particularly if the original order was not taken at the seller’

Federal Deception Law: 2.5.4.7 Consumer Goods and Services; Sales of Real Property, Home Improvements, Securities, and Insurance

The Cooling-Off Rule applies broadly to sales of consumer goods and services.355 It explicitly exempts the sale or rental of real property, the sale of insurance, and the sale of securities.356 However, the rule may apply to transactions in which a consumer engages a real estate broker to sell the consumer’s home or to rent and manage the consumer’s residence during a temporary period of absence.357 Those transactions are sales of services, not sal

Federal Deception Law: 2.5.4.9 What Sellers Are Covered

The Cooling-Off Rule covers sellers who are “engaged in the door-to-door sale of consumer goods or services.”363 On its face, this language does not require that the seller be regularly engaged in that type of transaction, so occasional door-to-door sales by a seller who usually sells from a regular business location should be covered.

Federal Deception Law: 2.5.5.1 Overview

Many of the scope provisions of state cooling-off rules track the FTC Cooling-Off Rule closely. Cases interpreting aspects of state cooling-off laws that parallel the Cooling-Off Rule are discussed in § 2.5.4, supra. However, other state cooling-off laws are broader or narrower in scope than the FTC rule.

Federal Deception Law: 2.5.5.2 Coverage That Is Broader Than the FTC Cooling-Off Rule

In a number of states, the cooling-off legislation covers an even wider range of consumer transactions than the FTC rule. For example, some states exclude only sales under $10 or $15 instead of the FTC’s cap of $25 (increased to $130 as of March 13, 2015 for sales that are subject to the rule but occur in some off-premises location other than the buyer’s home).

Federal Deception Law: 2.5.6.4 Other Consumer Protections

The FTC Cooling-Off Rule includes several other protections for the buyer aside from the right to cancel. It prohibits confession of judgment clauses or waivers of rights in door-to-door sales contracts439 and prohibits sale or assignment of the note or contract to a third party prior to midnight of the fifth business day following the sale.440 Many state laws impose these or additional requirements, such as particular disclosures.441

Federal Deception Law: 2.6.1 The FTC Mail, Internet, or Telephone Order Merchandise Rule

The FTC’s Mail, Internet, or Telephone Order Merchandise Rule453 requires that sellers of merchandise by mail, internet, or telephone have a reasonable basis to expect to be able to deliver the merchandise within the time specified in their advertising or within thirty days if no time is specified.454 The rule allows the thirty-day period to be extended to fifty days when the order is accompanied by a request for an extension of credit from the merchant to pay for the merchandise.

Federal Deception Law: 2.6.2 State Mail and Telephone Order Laws and Regulations; Other Claims

The FTC’s Mail, Internet, or Telephone Order Merchandise Rule does not preempt state laws that provide greater protections to consumers.470 Two states have incorporated the Mail, Internet, or Telephone Order Merchandise Rule into their UDAP regulations.471 A California statute tracks the FTC rule but explicitly applies to services as well as goods.472 Other state UDAP regulations are similar but slightly weaker, for example by giving sellers six we

Federal Deception Law: 2.8.3.1 Introduction

The Business Opportunity Rule528 is an outgrowth of the FTC’s Franchise Rule. The FTC’s Franchise Rule originally covered certain non-franchise business opportunities. In 2007, the FTC decided to confine the Franchise Rule to sales of franchises that were associated with trademarks and met certain other criteria.

Federal Deception Law: 2.8.3.2 Scope

The revised Business Opportunity Rule applies to any commercial arrangement in which the seller solicits a prospective buyer to enter into a new business, the buyer makes a required payment (excluding voluntary purchases of reasonable amounts of inventory at bona fide wholesale prices for resale),530 and the seller promises assistance in the form of providing locations (for example, for display racks), outlets, accounts, or customers, or buying the goods or services the buyer makes.531 Sales to

Federal Deception Law: 2.8.4 Other FTC, State UDAP Precedent

Most UDAP statutes cover franchise and business opportunity schemes.556 In some states, provisions in the UDAP statute or regulations under it specify certain unfair practices in the sale of franchises or business opportunities.557 In other states, unfair practices will be determined under the more general standards of the state’s UDAP statute, taking the prohibitions of the FTC rule into account.

Federal Deception Law: 2.8.5 Other Claims

A number of states have their own business opportunity or franchise laws.581 A state’s regulation of business opportunities within its borders through a franchise law does not violate the Commerce Clause even though the franchise may make sales in other states.582