The Federal Trade Commission’s “Cooling-Off Rule” gives buyers a right to cancel their purchase for a full refund until midnight of the third business day after the sale. Many states have passed their own laws to further expand consumer protection. For example, Maryland recently changed their rule to extend the time frame to five business days (seven business days if the consumer is 65 or older). The law requires that home improvement contractors must have signed documentation from buyers that they know their rights. The FTC rule also requires sellers to provide consumers with not only verbal notification of their right to cancel but copies of their contract and the right to cancel form which should be dated, signed and filled out in its entirety.
When calculating the right to cancel date you cannot count Sundays or business holidays. If your business is closed Saturdays you also cannot count this day. So for example, if your business is closed on Saturdays and your customer signs the right to cancel document on Thursday, they have until midnight the following Tuesday to cancel.
The consequences for not following this rule can be serious. Not only can contractors lose money on jobs they could also face criminal consequences. The added paperwork may be a pain but it’s nothing compared to noncompliance. Be sure all of your sales people understand that they need to verbally tell the customer about their right to cancel as well as leave copies of the customers signed contract and right to cancel document. It may make sense for your business to hold off on ordering any materials or starting the job until this time period has expired.
If you have any questions about calculating your right to cancel dates or state specific requirements, don’t hesitate to call Foundation Finance at 855-241-0024 ext. 5012 for help.
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