[Federal Register Volume 80, Number 6 (Friday, January 9, 2015)]
[Rules and Regulations]
[Pages 1329-1334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00164]



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  Federal Register / Vol. 80, No. 6 / Friday, January 9, 2015 / Rules 
and Regulations  

[[Page 1329]]



FEDERAL TRADE COMMISSION

16 CFR Part 429

RIN 3084-AB10


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

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission amends the Rule Concerning 
Cooling-Off Period for Sales Made at Homes or at Certain Other 
Locations (``Cooling-Off Rule'' or ``Rule''). The final Rule adopts 
with modifications the Commission's proposal to increase the 
exclusionary limit for all door-to-door sales. Under the final Rule, 
the revised definition of ``door-to-door sale'' distinguishes between 
sales at a buyer's residence and those at other locations. First, the 
revised definition retains coverage for sales made at a buyer's 
residence that have a purchase price of $25 or more. Second, the 
revised definition covers sales at other locations that have a purchase 
price of $130 or more.

DATES: This rule is effective on March 13, 2015.

ADDRESSES: Requests for copies of this document are available on the 
Commission's Web site, www.ftc.gov.

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

A. Cooling-Off Rule Summary

    The Cooling-Off Rule is a trade regulation rule that was 
promulgated by the Commission in 1972 to address unfair and deceptive 
practices in sales conducted at locations other than the place of 
business of the seller (``door-to-door sales''). In addition to sales 
at consumers' homes, door-to-door sales include sales 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. The Rule requires door-to-
door sellers to provide consumers with written and oral notice of a 
buyer's right to unilaterally rescind a contract within three business 
days from the date of the transaction.\1\ Additionally, such sellers 
must provide buyers with a completed receipt, or a copy of the sales 
contract, containing a summary notice informing buyers of the right to 
cancel the transaction.\2\
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    \1\ Door-to-door sellers must provide buyers with a completed 
cancellation form, in duplicate, captioned either Notice of Right to 
Cancel or Notice of Cancellation, in accordance with the 
requirements and language provided in 16 CFR 429.1(b). Duplicate 
copies are required so that consumers can return one notice and 
retain the other should they need to effect cancellation. Oral 
notice is required pursuant to 16 CFR 429.1(e).
    \2\ 16 CFR 429.1(a).
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B. Procedural Background

    In 2009, the Commission initiated a regulatory review of the 
Cooling-Off Rule, as it does periodically with all of its rules and 
guides, to determine whether the Rule should be retained, modified or 
rescinded.\3\ To make this determination, the Commission sought comment 
on the economic impact of the Rule, the need for the Rule, any possible 
conflicts between the Rule and state, local, or other federal laws or 
regulations, and the effect on the Rule of any technological, economic, 
or other industry changes. Finding that the Rule continues to serve a 
valuable purpose in protecting consumers, the Commission retained the 
Rule and concluded its regulatory review.\4\ At the same time, the 
Commission sought public comment on a proposed increase from $25 to 
$130 in the exclusionary limit set forth in the Definitions section of 
the Rule.\5\ Under the proposed revision, the Rule's definition would 
have covered door-to-door sales with a purchase price of $130 or more.
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    \3\ 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). The Commission also 
conducted reviews in 1998 and 1995. Rule on Cooling-Off Period for 
Door-to-Door Sales, 53 FR 45455 (Nov. 10, 1988); Rule Concerning 
Cooling-Off Period for Sales Made at Homes or at Certain Other 
Locations, 60 FR 54180 (Oct. 20, 1995). In the 1995 proceeding, the 
Commission determined, among other issues, that the Rule should 
continue to apply to sales occurring in places other than a 
consumer's home. Id. at 54183.
    \4\ Trade Regulation Rule Concerning Cooling-Off Period for 
Sales Made at Homes or at Certain Other Locations, Proposed Rule 
Amendment; Request for Public Comment, 78 FR 3855 (Jan. 17, 2013).
    \5\ Id.
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    In seeking comment, the Commission posed six questions: (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.\6\
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    \6\ Id. at 3860.
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    After careful consideration of the record, the Commission has 
decided to retain the exclusionary limit of $25 for door-to-door sales 
made at a buyer's residence, but amend the Rule to increase from $25 to 
$130 the exclusionary limit applicable to all other door-to-door sales 
made at a place other than a buyer's residence.

II. Basis for Final Rule and Analysis of Public Comment

    The Commission received a total of 33 public comments from a broad 
range of groups and individuals.\7\ Commenters included representatives 
from Better Business Bureaus (``BBBs''); the California Consumer 
Affairs Association (``CCAA''), which is a statewide association of 
government agencies and nonprofit organizations; the Attorney General 
of the Commonwealth of Massachusetts (the ``Massachusetts AG''); the 
Direct Selling Association (``DSA''), which is a trade association of

[[Page 1330]]

manufacturers and distributors that directly sell goods and services to 
consumers primarily in the home; and consumer advocates. The comments 
discussed three issues: (1) The exclusionary limit; (2) the Rule's 
effect on state laws; and (3) the Rule's receipt requirement and 
sellers' guarantee and return policies.
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    \7\ Comments are available on the Commission's Web site at: 
www.ftc.gov.
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A. The Exclusionary Limit

    The majority of commenters stated that the $25 exclusionary amount 
should not be increased. The most uniform concern raised by commenters 
opposing the increase was the risk of unfair or deceptive sales 
practices occurring within consumers' homes.\8\ For example, comments 
from the Massachusetts AG indicated that $25 is not an insignificant 
amount, especially in the residential context, where borrowers who may 
never have expressed an interest in a product are confronted in their 
own home by a seller who attempts to convince them to purchase a 
product.\9\ Similarly, other commenters discussed aggressive traveling 
sellers in consumers' neighborhoods seeking to deceptively solicit 
consumers within their homes.\10\ A few commenters suggested that some 
consumers feel pressured to enter into contracts with door-to-door 
salesmen solely to get the salesmen to leave their homes.\11\
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    \8\ See e.g., Massachusetts AG at 1(urging the FTC to maintain 
the exclusionary limit at $25 and stating that ``The Commonwealth 
recognizes that $25 is worth less, in real terms, than it was in 
1972, when 16 CFR part 429 was enacted. Nevertheless, the 
Commonwealth does not believe that $25 is an insignificant amount, 
especially in the door-to-door context, where borrowers who may 
never have expressed an interest in a product are confronted in 
their own home by a salesman who attempts to convince them to 
purchase a product.'') (emphasis added); Halbe at 1 (describing 
pushy, aggressive salesmen roving through her neighborhood); BBB of 
Southern Colorado at 1 (inferring that consumers are threatened or 
deceived into signing contracts to get sales persons to leave 
consumers' homes); BBB of Utah at 1; BBB of North Alabama at 1 
(stating that ``Door to door sales targets [sic] every homeowner who 
opens their door. Without a low threshold you will see more 
consumers loose [sic] more money to the crooks who walk through the 
neighborhoods.''); Ellenbecker at 1(expressing concern about 
deceptive travelling salesmen).
    \9\ Massachusetts AG at 1.
    \10\ BBB of North Alabama at 1; Halbe at 1; Ellenbecker at 1.
    \11\ BBB of Southern Colorado at 1; BBB of Utah at 1.
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    Several commenters expressed concern that increasing the 
exclusionary amount could exempt door-to-door sellers of multilevel 
marketing (``MLM'') distribution opportunities and sales of associated 
``start-up kits'' to prospective distributors.\12\ One commenter stated 
that these start-up kits typically cost $99 and that raising the 
threshold amount would exempt sale of the kits from the Rule.\13\ The 
commenter asserted that start-up kit sales should be covered by the 
Rule, because the sales cause these individuals to become committed to 
the MLM opportunity when, in reality, most of these individuals are 
likely to lose their investments.\14\
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    \12\ Barrett at 1; Bosley at 1; Brooks at 2-3; Fitzpatrick (for 
Pyramid Scheme Alert) at 1; Taylor (for the Consumer Awareness 
Institute) at 1. See also Christian (stating that the cooling-off 
period for distributors should be one month instead of three days). 
According to DSA, a start-up kit usually includes items such as 
samples, catalogs, order forms and other tools that help the 
individual begin selling. ``The Difference Between Legitimate Direct 
Selling Companies and Illegal Pyramid Schemes,'' Direct Selling 
Association, available at http://www.dsa.org/ethics/legitimatecompanies.pdf.
    \13\ Brooks at 2 (citing information found at http://www.dsa/org/ethics/legtimatecompanies.pdf).
    \14\ Id. at 2-3.
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    A few commenters supported the proposed increase. DSA, for example, 
stated that increasing the exclusionary limit to $130 would be 
appropriate, while also noting the continuing value of the Rule.\15\ 
DSA stated that increasing the exclusionary limit would continue to 
provide consumers with the right to cancel high-dollar value purchases 
within three days. DSA also stated that the proposed increase would 
reduce the burden on sellers of lower-cost items because such sellers 
would not be required to provide duplicate receipts and oral 
disclosures.
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    \15\ DSA at 2; Rothacker at 1. In addition, two other commenters 
provided brief statements in support of an inflationary adjustment 
of more than the proposed $130. Schafer at 1 (stating ``maybe $500 
or $1,000 should be the threshold if it needs to stay''); Kellam at 
1 (stating that ``For further consideration, the limit should be 
increased to $200 to allow for inflation in the next two to five 
years.'').
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    The Commission concludes that the record supports retaining the $25 
exclusionary limit for door-to-door sales made within consumers' homes. 
The record reflects significant concern among the majority of 
commenters about high-pressure sales tactics and deception occurring 
during in-home solicitations. These concerns echo many of the same in-
home sales concerns expressed by the Commission when it promulgated the 
Rule in 1972. The unfair and deceptive sales practices identified at 
that time included: (1) Deception by salesmen in getting inside the 
door, (2) high pressure sales tactics, (3) misrepresentation as to the 
quality, price, or characteristics of the product, (4) high prices for 
low-quality merchandise, and (5) the nuisance created by the visit to 
the home by the uninvited salesmen.\16\ The Commission concludes that 
retaining the $25 exclusionary limit for in-home sales is warranted to 
prevent the types of unfair and deceptive practices that gave rise to 
the Rule, and that an inflationary adjustment with respect to in-home 
sales would leave consumers without adequate protection under the Rule. 
Accordingly, the Commission is retaining the $25 exclusionary limit for 
such sales.
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    \16\ Cooling-Off Period for Door-to-Door Sales, Trade 
Regulations Rule and Statement of Basis and Purpose, 37 FR 22933, 
22937 (Oct. 26, 1972).
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    The Commission, however, has determined to amend the Rule to 
increase the limit to $130 for door-to-door sales made away from 
consumers' residences. The record does not reflect the same level of 
concerns about problematic practices when sales are made at other 
locations. In addition, the Commission is cognizant of costs of 
complying with the Rule. As stated in the record, because of price 
increases over time, more items are now covered by the Rule.\17\ This 
results in compliance burdens for sellers of lower cost goods. For 
example, while the Rule does not exempt souvenir vendors and sellers of 
perishable food at farmers' markets, increasing the threshold amount 
for sales at other locations could relieve these types of vendors from 
providing cancellation notices in connection with lower-dollar sales. 
The Commission concludes that increasing the exclusionary limit to $130 
for sales made away from a consumer's residence will reduce compliance 
burdens for sellers of lower cost goods, while continuing to provide 
consumers with the Rule's protections for higher-dollar value 
purchases.
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    \17\ DSA at 2.
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    With respect to transactions involving MLM start-up kits, the 
Commission notes that whether such transactions are covered by the Rule 
is a fact-specific inquiry that depends on whether the particular 
transaction is a ``sale, lease or rental of consumer goods or 
services.'' \18\ To the extent such a transaction would be covered 
under the final Rule, the location of the transaction would govern 
whether the $25 exclusionary amount or the $130 exclusionary amount 
would apply.
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    \18\ See 16 CFR 429.0(a); 429.0(b) (defining ``consumer goods or 
services'' as ``goods or services purchased, leased, or rented 
primarily for personal, family, or household purposes, including 
courses of instruction or training regardless of the purpose for 
which they are taken'').
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B. The Rule's Effect on State Laws

    Some commenters expressed concern about how the proposed increase 
would affect state cooling-off laws. DSA commented that the increase in 
the exclusionary limit would not impact the enforcement of state laws 
and municipal

[[Page 1331]]

ordinances.\19\ CCAA offered a different view, stating that if the Rule 
raises the exclusionary amount to $130, unscrupulous door-to-door 
sellers could challenge a state cooling-off rule law and similar 
statutes, although CCAA did not discuss the likely basis for any such 
challenges.\20\
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    \19\ DSA at 3.
    \20\ CCAA at 1.
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    The Commission finds that raising the threshold limit for door-to-
door sales made away from a consumer's home should not adversely impact 
state laws. Section 429.2 of the Rule, which remains unchanged, 
provides that state laws are preempted only to the extent that such 
laws are ``directly inconsistent'' with the Rule. State laws that have 
either lower exclusionary limits of $25 or less, or no exclusionary 
limit at all, are not ``directly inconsistent'' with the Rule, and 
therefore would not be preempted on this ground. It is possible for 
sellers to comply with the Rule when they make door-to-door sales of 
$130 or more away from a consumer's home, and to also comply with state 
laws governing sales of smaller amounts.

C. Receipt Requirement and Sellers' Guarantee and Return Policies

    DSA repeated a comment made during the 2009 rule review about the 
requirement that sellers provide consumers with two copies of the sales 
receipt and the mandated cancellation notice. DSA states that providing 
duplicate receipts imposes a burden on door-to-door sellers that is no 
longer necessary because orders and cancellations are frequently made 
over the telephone and the Internet.\21\ The Commission disagrees. The 
duplicate receipt and notice required by the Rule is beneficial to 
consumers, and based on the comments provided, may even have greater 
significance for consumer populations that may be targeted by door-to-
door sales, such as the elderly.\22\ Further, the Commission notes that 
the Rule does not expressly address electronic methods by which a 
seller might comply with the Rule's duplicate receipt and notice 
requirement. Whether and how other laws, such as the Electronic 
Signatures in Global and National Commerce Act (``ESIGN''),\23\ may 
provide electronic means that could be used to meet the duplicate 
receipt and notice requirement, or other Rule requirements, would 
depend on a case-by-case analysis of the specific legal and factual 
circumstances. Finally, the Rule does not apply if a transaction is 
conducted and consummated entirely by mail or telephone--and the 
Commission interprets the Rule to similarly not apply to transactions 
conducted and consummated entirely over the Internet--as long as there 
is not any other in person contact between the buyer and seller or its 
representative prior to the delivery of goods or the performance of 
services.\24\
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    \21\ DSA at 3.
    \22\ These consumer populations may be less likely to have 
affordable access to photocopiers and electronic devices. The 
duplicate receipt and notice requirement avoids imposing additional 
expense on consumers who would need to access copier machines and 
other electronic devices in order to preserve a record of their 
right to cancel. See Trade Regulation Rule Concerning Cooling-Off 
Period for Sales Made at Homes or at Certain Other Locations, 
Proposed Rule Amendment; Request for Public Comment, 78 FR 3855, 
3862 (Jan. 17, 2013).
    \23\ 15 U.S.C. 7001-7006.
    \24\ See 16 CFR 429.0(a)(4).
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    DSA also repeated its 2009 comment that providing notice of both 
Cooling-Off Rule cancellation rights and a company's cancellation and 
return policy can be confusing to consumers when they provide for 
different cancellation, guarantee, or return policies.\25\ DSA 
reiterated its recommendation that the Commission permit companies to 
substitute the Rule's language with their own guarantee or return 
policies, which policies, according to DSA, often provide consumers 
with greater protections than the Rule.\26\ The Commission is not 
adopting DSA's recommendation because any potential confusion that 
consumers face with multiple options for cancellation is 
counterbalanced by the need to have a federally enforceable minimum 
amount of time for which consumers may cancel door-to-door sales. 
Without a federally required minimum, consumers' cancellation rights 
could be subjected to negotiation in high-pressure, deceptive door-to-
door sales, which could result in more onerous cancellation and other 
requirements for consumers.
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    \25\ DSA at 3.
    \26\ Id.
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III. Regulatory Flexibility Act Certification and Regulatory Analysis

    The final amendment to the Commission's Cooling-Off Rule announced 
in this notice will increase from $25 to $130 the exclusionary limit 
for door-to-door sales made away from a buyer's residence. Given 
concerns raised by commenters about problematic practices occurring 
within consumers' homes, the final amendment will not increase the 
exclusionary limit for sales made at a buyer's residence. The final 
amendment will reduce compliance burdens for regulated sellers who will 
no longer be required to provide Notices of Cancellation for door-to-
door sales made away from a buyer's residence, unless the purchase 
price of the sale is $130 or more. Moreover, the final amendment will 
not impose upon any regulated sellers new notice or other requirements. 
As a result, the Commission believes the economic impact of the final 
amendment will be minimal and that it will not have an adverse economic 
impact on regulated sellers or consumers. As reflected in this 
proceeding and in the Commission's experience, door-to-door sellers are 
often small entities. Because the final amendment reduces compliance 
burdens, door-to-door sellers who are also small entities should not 
face any significant economic hardship as a result of the final 
amendment. At most, a small entity may face costs associated with 
training and educating sellers about the amendment to the Rule, but 
these costs would likely be modest and outweighed by the reduced burden 
for those entities that will no longer need to provide Notices of 
Cancellation for certain sales. Accordingly, the Commission certifies 
that the final amendment will not have a significant economic impact on 
a substantial number of small entities as defined in the Regulatory 
Flexibility Act, 5 U.S.C. 601-612. The final amendment, therefore, is 
exempt from the final regulatory flexibility analysis requirements of 
section 604, 5 U.S.C. 604.\27\ Further, this document serves as notice 
to the Chief Counsel for Advocacy of the Small Business Administration 
of the agency's certification of no significant impact.
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    \27\ 5 U.S.C. 605(b).
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    For similar reasons, a regulatory analysis under Section 22 of the 
FTC Act is not required. See 15 U.S.C. 57b-3(a)(1). The Commission 
believes the amendments will have no significant economic or other 
impact on the economy, prices, or regulated entities or consumers.

IV. 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'' (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.

V. Conclusion

    For the reasons described above, the Commission has determined to 
increase

[[Page 1332]]

the Rule's exclusionary amount with respect to door-to-door sales that 
are made away from a buyer's residence. The Cooling-Off Rule will 
continue to apply to these types of transactions, however, the 
exclusionary limit will be increased to $130. Increasing the 
exclusionary limit for these types of sales should eliminate compliance 
burdens for various types of vendors, who typically engage in low-
dollar amount transactions, but not high-pressure sales tactics that 
are designed to keep consumers' captive. At the same time, the record 
supports leaving the $25 exclusionary limit in place for door-to-door 
sales made within consumers' homes.

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 amends 16 CFR part 429 as follows:

PART 429--RULE CONCERNING COOLING-OFF PERIOD FOR SALES MADE AT 
HOMES AND OTHER LOCATIONS

0
1. The authority citation for part 429 continues to read as follows:

    Authority:  Sections 1-23, Federal Trade Commission Act, 15 
U.S.C. 41-58.


0
2. Amend Sec.  429.0, by revising paragraph (a) introductory text to 
read as follows:


Sec.  429.0  Definitions.

* * * * *
    (a) Door-to-Door Sale--A sale, lease, or rental of consumer goods 
or services 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 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), and which has a purchase price of $25 or more 
if the sale is made at the buyer's residence or a purchase price of 
$130 or more if the sale is made at locations other than the buyer's 
residence, whether under single or multiple contracts. The term door-
to-door sale does not include a transaction:
* * * * *

    By direction of the Commission.
Donald S. Clark,
Secretary.

    Note:  The following will not appear in the Code of Federal 
Regulations:

Concurring Statement of Commissioner Julie Brill Federal Trade 
Commission Trade Regulation Rule Concerning Cooling-Off Period for 
Sales Made at Homes or at Certain Other Locations (the ``Cooling-Off 
Rule'')

January 6, 2015

    Today, the Commission announces that it has amended the 
Commission's Cooling-Off Rule.\1\ Through this action, the 
Commission retains the exclusionary limit for some ``door-to-door'' 
sales, but raises it for others. I write separately to voice my 
strong support for retaining the exclusionary limit for sales in 
consumers' homes; to note my skepticism, based on the record before 
us, of the need to raise the exclusionary limit for sales in a 
seller's transient location; and, as a result, to strongly encourage 
states to engage in detailed fact finding about their own local 
conditions before raising any exclusionary limits under their own 
state cooling-off laws and rules.
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    \1\ Trade Regulation Rule Concerning Cooling-Off Period for 
Sales Made at Homes or at Certain Other Locations, 16 CFR part 429.
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    The Cooling-Off Rule was designed to prevent unfair and 
deceptive practices in sales that occur outside a seller's permanent 
place of business.\2\ The Cooling-Off Rule uses the nomenclature 
``door-to-door'' sales to describe the sales that it covers, and 
includes within the definition of ``door-to-door'' sales both sales 
in a consumer's home as well as sales at a seller's transient 
location.\3\ Sales in consumers' homes and at a seller's transient 
location have long raised consumer protection concerns, as some 
sellers employ deceptive and unfair practices, including high 
pressure sales tactics; misrepresenting the quality of goods; and 
placing inappropriate roadblocks to obtaining refunds, including 
simply disappearing before the consumer realizes that he or she has 
been scammed.\4\ The Cooling-Off Rule's primary mechanism for 
protecting consumers from such unscrupulous sales tactics is to give 
consumers who purchase in these locations three business days to 
cancel sales of $25 or more.\5\ Under the Cooling-Off Rule, covered 
sellers must provide consumers with written and oral notice of this 
right to cancel.\6\
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    \2\ Id.; see also, Cooling-Off Period for Door-to-Door Sales, 
Trade Regulation Rule and Statement of Its Basis and Purpose, 37 FR 
22933, 22937 (Oct. 26, 1972).
    \3\ 16 CFR 429.0(a) (definition of ``Door-to-Door Sale'').
    \4\ See Cooling-Off Period for Door to Door Sales, Trade 
Regulation Rule and Statement of Its Basis and Purpose, 37 FR at 
22937 (``The complaints of consumers regarding door-to-door salesmen 
fall within five basic headings. These are: (1) Deception by 
salesmen in getting inside the door; (2) high pressure sales 
tactics; (3) misrepresentation as to the quality, price, or 
characteristics of the product; (4) high prices for low-quality 
merchandise; and (5) the nuisance created by the visit to the home 
by the uninvited salesmen'').
    \5\ 16 CFR 429.1(a).
    \6\ 16 CFR 429.1(a), (b), (e).
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    The $25 exclusionary limit established in the Cooling-Off Rule 
has not changed since the Rule was first promulgated in 1972. In 
January 2013, following completion of a regulatory review of the 
Rule, the Commission sought public comment on a proposal to raise 
the exclusionary limit for all sales that qualify as ``door-to-door 
sales'' from $25 to $130, to account for inflation since the Rule 
was issued.\7\ As further explained in the January 2013 Federal 
Register Notice, the Commission derived the $130 figure by 
calculating inflation using the U.S. Department of Labor's Consumer 
Price Index for all-urban consumers (``CPI-U'').\8\
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    \7\ The Commission initiated the regulatory review in 2009, 
seeking public comment to determine whether the rule should be 
retained, modified, or rescinded. Trade Regulation Rule Concerning 
Cooling-Off Period for Sales Made at Homes or at Certain Other 
Locations, Request for Public Comment, 74 FR 18170 (Apr. 21, 2009). 
After the Commission decided to retain the Rule, it sought public 
comment on a proposal to an increase of the exclusionary limit. 
Trade Regulation Rule Concerning Cooling-Off Period for Sales Made 
at Homes or at Certain Other Locations, Proposed Rule Amendment, 
Request for Public Comment, 78 FR 3855 (Jan. 17, 2013).
    \8\ See 78 FR at 3869, n.69 (``The average value of the CPI-U 
for 2010 was 218.056, while the average value for 1972 was 41.8. . . 
. 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'').
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    The Commission received thirty-three comments in response to its 
proposal to raise the exclusionary limit to $130 for all ``door to 
door'' sales. As discussed more fully below, four commenters 
supported a blanket increase of the exclusionary limit to $130.\9\ 
The vast majority of commenters--twenty-eight--opposed the proposed 
blanket increase to $130. These twenty-eight commenters cited a 
variety of reasons for their opposition. Most of them expressed 
general concerns about the need for protections against high 
pressure and predatory sales practices.\10\ The

[[Page 1333]]

Massachusetts Attorney General, the California Consumer Affairs 
Association, and several chapters of the Better Business Bureau 
(``BBB'') cited serious concerns about deceptive and high pressure 
sales tactics by traveling salespeople for transactions well under 
$130.\11\ Some commenters stated that, while the price of goods and 
services may have risen with inflation, $25 is still a significant 
amount of money for consumers.\12\
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    \9\ The Direct Selling Association (``DSA'') and Mike Shaw Auto 
Group, as well as two individual commenters supported an increase in 
the exclusionary limit. DSA stated that, because of inflation, the 
Rule now covers lower cost items that it was not originally intended 
to cover. It also cited concerns regarding the compliance costs for 
sellers of lower cost goods. DSA Comment at 2-3. Mike Shaw Auto 
Group suggested that the amount be rounded up to the nearest $50. 
Mike Shaw Auto Group Comment at 1. Another commenter suggested that 
the amount be raised to $200 to account for future inflation, while 
the remaining commenter expressed support for the FTC's proposed 
increase. BELO KELLAM [sic] Comment at 1, Susan Rothacker Comment at 
1.
    \10\ Some commenters raised general concerns about deceptive 
practices. See, e.g., Frances Goff Comment at 1 (opposed to raising 
the minimum based on the persistence of dishonest sales tactics). 
Others raised more specific concerns, such as sellers who target 
senior citizens, or predatory sales practices in multilevel 
marketing. Six commenters raised concerns with multilevel marketing 
organizations (``MLMs''), whose start-up kits can easily cost below 
the FTC's proposed threshold. For example, Stacie Bosley, an 
economist and assistant professor at Hamline University, commented 
on the role of ``urgency'' in multilevel marketing recruitment and 
stated that the rapid rise in MLMs since the establishment of the 
Rule is a new development suggesting that the exclusionary limit 
should remain unchanged. Stacie Bosley Comment at 1-2.
    \11\ The Massachussetts Attorney General, for instance, stated 
that $25 was not an insignificant amount, especially in door-to-door 
sales where economically disadvantaged individuals and senior 
citizens are often targeted in their homes. Massachusetts AG Comment 
at 1-2. The California Consumer Affairs Association (``CCAA'') 
similarly believes that increasing the Cooling-Off Rule's minimum to 
$130 would remove crucial safeguards to reduce abusive sales 
practices by door-to-door sellers, who often target senior citizens, 
new immigrants, and low-income families. CCAA Comment at 1. Several 
BBB chapters expressed concern that a raise in the threshold to $130 
would eliminate needed protections for most door-to-door sales, 
including those that target vulnerable consumers at home. BBB of 
Southern Colorado Comment at 1; BBB of North Alabama Comment at 1; 
BBB of Louisville, Kentucky Comment at 1; BBB of Utah Comment at 1.
    \12\ See, e.g., Susanna Perkins Comment at 1, noting that ``most 
US households have seen their incomes stagnate.''
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    After consideration of commenters' concerns, the Commission 
today has decided to (1) retain the $25 limit for door-to-door sales 
made at a buyer's residence, and (2) amend the Rule to increase the 
limit from $25 to $130 for sales that occur at transient locations.
    I fully support the retention of the $25 exclusionary limit for 
sales in consumers' homes. While the expansion of Internet marketing 
has changed the business model of many direct sales companies, door-
to-door sales continue to be a concern, especially for consumers who 
are the targets of aggressive, high pressure, or deceptive sales 
tactics in their own homes. AARP and the BBB have identified in-home 
door-to-door sales as being among the top scams targeting senior 
citizens.\13\ The BBB continues to receive consumer complaints about 
door-to-door sales of magazines, cleaning products, meat, 
photography services, and cosmetics--all items that typically fall 
below $130.\14\ In 2013, the BBB received over a thousand complaints 
concerning door-to-door magazine sales alone.\15\ As consumers 
continue to be approached in their homes with offers for products 
under $130, the Commission correctly recognizes the significance 
that lawmakers, advocates, and consumers place on retaining the $25 
limit for sales that occur in consumers' homes. I am not persuaded, 
however, of the need to raise the exclusionary limit for transient 
sales. The four commenters who supported an increase in the 
exclusionary limit--the Direct Selling Association (``DSA''), Mike 
Shaw Auto Group, and two other individual commenters--did not 
distinguish between in-home and transient sales, and lodged only 
general complaints about the rule, including that, due to inflation, 
the Rule now covers lower cost items that it was not originally 
intended to cover.\16\ With respect to the auto sales that the Mike 
Shaw Auto Group might be concerned about, the Cooling-Off Rule 
already exempts auto tent sales and other sales in transient 
locations.\17\ The only commenter who mentioned specific concerns 
about the $25 exclusionary limit for transient sales did so in 
response to the Commission's 2009 Federal Register Notice seeking 
comments on whether to retain the rule, raising a concern about 
transient sales as they relate to perishable food items.\18\ This 
commenter suggested that sellers of food items in transient 
locations be exempted from the Cooling-Off Rule, similar to the 
Rule's exemption for arts and crafts shows.\19\ I believe the 
concerns of this commenter could have been addressed in a more 
targeted and effective manner just as the commenter suggested, 
through an exemption from the federal rule sales of perishable 
items. Some states take this approach, and exclude perishable items 
from coverage of its cooling-off rule.\20\
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    \13\ Sid Kirchheimer, 6 Common Door-to-Door Scams, AARP 
Bulletin, Oct. 29, 2012, http://www.aarp.org/money/scams-fraud/info-10-2012/common-door-to-door-scams.html; BBB Warns of Scams That 
Target Seniors, Better Business Bureau Serving Wisconsin, May 7, 
2014, http://www.bbb.org/wisconsin/news-events/news-releases/2014/05/bbb-warns-of-scams-that-target-seniors/.
    \14\ See Better Business Bureau, 2013 Complaint and Inquiry 
Statistics, U.S. Statistics Sorted by Industry, available at http://www.bbb.org/globalassets/local-bbbs/council-113/media/complaint-stats/us-stats-industry-2013.pdf; see also Massachusetts AG Comment 
at 2.
    \15\ Better Business Bureau, 2013 Complaint and Inquiry 
Statistics, U.S. Statistics Sorted by Industry (reporting 41,851 
consumer inquiries and 1,149 consumer complaints concerning door-to-
door magazine sales).
    \16\ DSA Comment at 2-3; Mike Shaw Auto Group Comment at 1; BELO 
KELLAM [sic] Comment at 1; Susan Rothacker Comment at 1.
    \17\ 16 CFR 429.3(a) (exempting from the rule ``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 with a permanent place of business).
    \18\ Fabian Seafood Company Comment at 1 (June 13, 2009).
    \19\ In addition to the exclusion for motor vehicle tent sales, 
the federal Cooling-Off Rule also excludes ``sellers of arts or 
crafts sold at fairs or similar places.'' 16 CFR 429.3(b).
    \20\ See, e.g., N.M. Stat. Ann. section 57-12-21(C)(2) (New 
Mexico's cooling-off rule's definition of covered consumer goods and 
services are those ``other than perishable goods or agricultural 
products'').
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    In contrast, among those commenters who opposed the increase in 
the exclusionary limit, some specifically raised concerns about 
transient sales.\21\ As for the remaining commenters who objected to 
an increase in the exclusionary limit, it is not clear whether they 
were raising concerns about only in-home sales, or both in-home and 
transient sales. Many of them employed the term ``door-to-door 
sales'' in discussing their concerns.\22\ However, these commenters 
could simply (and correctly) have been employing the federal rule's 
definition of ``door-to-door'' sales, which incorporates both in-
home sales and sales in transient locations under the umbrella of 
``door-to-door'' sales,\23\ rather than attempting to limit their 
concerns to in-home sales.
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    \21\ Two commenters who opposed the increase in the exclusionary 
limit specifically referenced concerns about transient sales. See 
Rochelle Mezzano Comment at 1 (citing concern about the difficulty 
in obtaining recourse from transient sellers who do not honor the 
Cooling-Off Rule based on her experience in purchasing an item while 
on a cruise ship); Alan Lunin Comment at 1 (citing concern that $25 
is a significant amount of money for consumers who can be targeted 
``anywhere, including outside the grocery store or inside church'').
    \22\ See Mike A. Jacques-O'Gorman Comment at 1-2; Adam 
Offenbecker Comment at 1; Gowen Consulting Comment at 1.
    \23\ See supra note 3.
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    As the Commission correctly notes in today's Federal Register 
Notice of its decision, the federal Cooling-Off Rule does not 
preempt state laws or rules to the extent that such rules are not 
``directly inconsistent'' with the federal Cooling-Off Rule.\24\ 
More protective state laws--those that have lower exclusionary 
limits, no exclusionary limits, or broader coverage of the types of 
sales that qualify for the cooling-off period and notice 
requirements of their rules--are not ``directly inconsistent'' with 
the federal rule, and so are not preempted.\25\
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    \24\ See Trade Regulation Rule Concerning Cooling-Off Period for 
Sales Made at Homes or at Certain Other Locations, Rule Amendment, 
__FR __, at __(Jan. __, 2015) (citing 16 CFR 429.2).
    \25\ Id.
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    Indeed, states have long had their own cooling-off rules that in 
many cases provide consumers with protections greater than those 
provided by the federal rule. Forty-nine states and the District of 
Columbia have a state cooling-off rule.\26\ Some states, like 
Arizona,\27\ North Carolina,\28\ and Illinois,\29\ cover only sales 
in consumers' homes, with exclusionary limits ranging from zero to 
$25. Most state laws cover both in-home sales and sales at transient 
locations, and once again these exclusionary limits range from zero 
to $25.\30\ New Hampshire, with $150 minimum

[[Page 1334]]

exclusionary limit, is the only state with a dollar limit above 
$25.\31\
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    \26\ Washington is the only state with no law or regulation 
providing a cooling-off rule, and so it relies entirely on the 
federal rule. Washington has laws in place that give consumers a 
right to cancel contracts for specific types of goods or services, 
including camping club and health club memberships, credit repair 
services, business opportunities, hearing aid purchases, retail 
installment plans, telemarketing sales, timeshare purchases, and 
vocational school enrollment. See Consumer Issues A-Z: Cancellation 
Rights, Washington State Office of the Attorney General, http://www.atg.wa.gov/consumerissues/cancellationrights.aspx#DoorToDoorSales (last visited Dec. 22, 
2014).
    \27\ Ariz. Rev. Stat. Ann. section 44-5001.
    \28\ N.C. Gen. Stat. Ann. sections 25A-38, 39.
    \29\ 815 Ill. Comp. Stat. Ann. 505/2B.
    \30\ For instance, Alaska provides for a $10 threshold and a 
five-day cooling-off period, Alaska Stat. Ann. section 45.02.350; 
Vermont provides for a $5 threshold, Vt. Stat. Ann. tit. 9, section 
2451a (exempting purchases of under $25 where there is no contract 
or receipt); Oregon has no dollar limit, Or. Rev. Stat. Ann. 
sections 83.710, 720; and New York has a $25 limit, N.Y. Pers. Prop. 
Law section 426.
    \31\ N.H. Rev. Stat. Ann. section 361-B:1.
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    With respect to enforcement, states have been much more active 
in enforcing their state rules than has the Commission.\32\ This is 
no doubt due at least in part to the fact that the states are closer 
to consumers who suffer from many of the unscrupulous activities 
involving sales in the home and in transient locations.
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    \32\ See, e.g., Second Am. Compl. at ]] 11-16, 34-36, State of 
West Virginia v. Quick Silver Restoration, LLC, et al., No. 14-C-
1952 (W. Va. Cir. Ct. filed Nov. 6, 2014) (alleging that a roofing 
and home improvement company engaged in high pressure door-to-door 
solicitations that violated several consumer protection laws and 
regulations, including the state and federal cooling-off rules; 
Compl. at ] 1, State of Vermont v. Terry, No. 570-9-14 Wncv (Vt. 
Super. Ct. filed Sept. 24, 2014) (alleging that a door-to-door meat 
salesman violated the state's Consumer Protection Act by failing to 
notify consumers of their three-day right to cancel, misleading 
consumers regarding the price and guarantee on the meat, failing to 
disclose material information to the consumer, and selling meat 
without a required license); Compl., Commonwealth of Virginia v. 
KLMN Readers Servs. Inc., No. CL13002796-00 (Chesapeake Cir. Ct. 
filed Nov. 25, 2013) (alleging that a door-to-door magazine company 
violated Viriginia's Consumer Protection and Home Solicitation Sales 
Acts) (default judgment granted Sept. 24, 2014). In contrast, the 
last time the Federal Trade Commission employed the federal Cooling-
Off Rule in an enforcement action was nearly 15 years ago. Compl., 
F.T.C. v. College Resource Mgmt., Inc. et al., No. 3-01CV0828-G 
(N.D. Tex. May 1, 2001) (alleging, inter alia, that a purported 
college financial services company violated Section 5 of the FTC Act 
and the Cooling-Off Rule in connection with its deceptive practices 
in financial aid sales seminars held at hotels or in banquet rooms).
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    Because I am not persuaded that the federal Cooling-Off Rule's 
long-standing $25 exclusionary limit on transient sales should be 
raised to $130, and because I find there is convincing evidence on 
the overall need to continue protecting consumers through cooling-
off rules, I urge state policy makers, law enforcement officials, 
and regulators to not interpret today's amendment to the federal 
Cooling-Off Rule as a signal that they should follow suit and raise 
the exclusionary limit of their respective cooling-off rules for 
sales in transient locations. Indeed, the often highly localized 
nature of potentially deceptive practices involving sales in 
transient locations puts states in the best position to determine 
the wisdom of raising their own exclusionary limits for sales in 
transient locations. I strongly encourage any state that may 
consider following the course of action taken by the Commission 
today to engage first in a more focused effort to gather evidence 
about potentially unscrupulous activities involving transient sales 
in their jurisdictions.

[FR Doc. 2015-00164 Filed 1-8-15; 8:45 am]
BILLING CODE 6750-01-P