Possible confict, as to notice requirements, between State law and FTC's Trade Regulation Rule Concerning A…

Possible confict, as to notice requirements, between State law and FTC's Trade Regulation Rule Concerning A CoolingPeriod for Door-to-Door Sales (16 C. R. 429) (File No. 753 7009)

Opinion Letter
May 20, 1975
Dear Mr. Feldman:

Ths is in response to your request for an advisory opinion regarding confict, as to notice requirements, between State law and the Federal Trade Commission s Trade Regulation Rule Concerrg a Cooling-Off Period for Door-to-Door Sales. The question posed is: Would printing of both the notice of the buyer's right to cancel a door-to-door transaction specified in the Commission s Rule and any such notice required by State statute or muncipal ordinance, identifying one as the Rule and the other as State law, violate the Rule where the statute or ordinance involved prescribes a mandatory fonn of notice which in some respects may be incompatible with the fonn of notice prescribed by the Rule? It is the Commssion s understanding, based upon the infonnation submitted, that you have requested the opinion for your own guidance and on behalf of the Major Finance Corporation, a company engaged in purchasing commercial paper from door-to-door sellers. Puuant to your advice, the company proposes to requie door-to-door selling companies from which it purchases commercial paper to include in contracts for transactions subject to the Commission s Rule both the notice of the buyer s right to cancel requied by State law or municipal ordinance and the notice specified in the Commission s Rule, identifying one as the Rule and the other as State law. The Commission h3-' no objection to the inclusion in such contracts of both the notice requied by State law or municipal ordinance and the summar notice specifIed in the Commssion s Rule, identifyig one as the Rule and the other as State law, as long 3-' any language in the State or muncipal notice directly inconsistent with the Rule is stricken. Since the Commission s rule gives the consumer a uniatera right cancel a transaction within three days, \\ithout penalty or fee, language in a State notice misinformg the buyer of the existence of a penalty or fee (i.e. If you cancel, the seller may keep all or par of your cash down payment") is directly inconsistent with the Rule and, if included in the sales contract or receipt, must be stricken. Moreover, since the buyer's right to cancel transactions covered by the Rule is not limited 1216 FEDEHAL TRADE COMMISSIOK DECISIONS to agreements solicited at or near the buyer s residence, does not require the buyer to furish any reason for cancellation, and may be exercised by mail or delivery of any wrtten notice or telegram, any language to the contrary in a state notice is similarly directly inconsistent with the Rule. Any other language in a state notice, the effect of which is to misrepresent in any manner the buyer s right to cancel under the Commission s Rule, must be omitted or stricken because directly inconsistent with the Rule. However, language in a State notice which informs buyers of State-created rights in addition to those conferred upon them by the Rule, or informs them how to be entitled to those rights, may be included in new contract or receipt forms, and retained in existing forms without being stricken. Cognizant that providing both the summar notice required by the Rule and the notice required by State law could result in needless duplication in a contract, the Commssion would not object to a seller using a composite notice containing elements of both the Rule s notice and the State notice, provided that the composite notice expressed no restrictions or limitations upon the buyer s right to cancel which are not contained in the Commission s Rule. A composite notice must also inform the buyer of a right to cancel at least as extensive as that described in the Commission s prescribed summary notice, including reference to the Notice of Cancellation form which must be attached to the contract.

By advising that it would not object to use of both the summa notice prescribed by the Rule and that requied by State law, with inconsistent State language stricken, or to use of a composite notice the Commission, of course, does not intend to raise the implication that sellers may not use only the form of sumar notice prescribed by the Rule, where this would also satisfy State requiements. The Commssion is aware of the dimculty imposed upon seners who are subject to inconsistent State and Federal legal obligations. In the interest of national uniformity, the Commssion continues to encourge the States to eliminate or change the requiements of their laws which are inconsistent with the Rule, to the extent that they provide less protection to consumers. The Commission also encourges those states with a specified form of notice expressing restrictions or limitations which are not contained in the Commssion s Rule to consider use of contracts with only the notice prescribed by the Rule as satisfying State notice requirements, because it is the Commission s opinion shared by numerous State and local offcials who have consulted with the Commission, that the Rule s notice provides the buyer with the essential information concernng his or her unilatera right to cancel. Whether the notice of the buyer s right to cancel prescribed by the ADVISORY OPINIONS AND REQUESTS THEREFOR 1217

117:J Rule is printed alone, in a composite form or in addition to the state notice, the Rule s notice must be given in substantially the form specified and must comply with the minimum size and placement requirements of the Rule.

The Commission would consider it to be a violation of its Rule if a ;"pletel receipt or contract pertaini;"gto a sale subject to the Rule contained only a state-required notice if that notice did not inform the consumer of his or her unilateral right to cancel a transaction within three days, without penalty or fee, and appropriately refer to the attached Notice of Cancellation form for an explanation of that right. With enactment of the Magnuson-Moss Waranty-Federal Trade Commission Improvement Act, the Rule extends to door-to-door transactions, as defined in the Rule, in or affecting commerce. The basis of the Commission s opinion is that trade regulation rules have the force and effect of law, and, like other substantive federal administrative regulations, preempt conficting State law- The Commssion s Cooling-Off Rule preempts State laws and municipal ordinances to the extent that they do not accord the buyer the same or greater right to cancel a door-to-door sale than that provided by the rule, as well as State-required notices to the extent that they do not provide notice of the right to cancel the transaction in substantial1y the same form and manner as the sumar notice set forth in the rule. By including in a contract for a transaction covered by the rule a Staterequired notice of cancellation rights containing language directly inconsistent with the provisions of the - rule, the buyer would be misinformed of his or her right to cancel under the rue and the full effectiveness of the rule would be frustrated. The Commission emphasizes that the coordinated efforts of both the Commission and State and iocal officials are essential in providing the consumer with an effective right to cancel door-to-door transactions within a cooling-off period. The Commission s opinion that language in a State summary notice should be stricken if directly inconsistent with the provisions of the Commission s rule is not intended to annul or diminish any rights and remedies provided to consumers by State law and enforceable thereunder.

By direction of the Commission.

Letter of Request