Advisory opinion letter

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ADVISORY OPINIONS 144

say that you do not want the goos or services and must be mailed before midnight of the third business day after you sign this agreement. The notice must be mailed to:

(insert name and mailing address of seller)

If you cancel, the seHer may keep all or part of your down payment. The Commission believes that the specific provisions of the UCCC form of notice misinform buyers as to their rights under the Rule and conflict with it as follows:

If this agreement was solu;ited at your residence The Rule s summary notice contains no parallel provision, but the coverage of the Rule is broader than that of the Code; generally, the Rule covers sales made by means of personal solicitation at a place other than the placc of business of the seller. This Code notice language would misinform buyers as to the scope of their right to cancel under the Rule and is therefore in conflict with the Ru18.

'I A 1nd YQ1, do not want the goods ar servu;es This provision implies that the buyer must state a specific reason for cancelling the transaction , a condition not required by the Rule. The Rule s Statement of Basis and Purpose notes that the words " for any reason" were eliminated from the final version of the Rule since such a requirement would tend to constrain the exercise of a buyer s right to cancel. This and related UCCC noticc language would misinform buyers as to cancellation requirements of the Rule and are in confJict with the Rulc. Tou may cancel this agrewnwnt by rrmiling a notu;e to the seller. This provision also misinforms the buyer of his rights, because under the Rule a buyer may cancel by delivering a copy of the cancellation form provided (or any other written notice) or by sending a telegram-in addition to mailing a notice to the seller. These methods of cancelling are specifically mentioned in the Rule s Notice of Cancellation form. In the Commission s view, this and other language to the same effect in the UCCC notice confJicts with the Rule.

If you cancel, the seller may keep all ar part of your down payment. "

This is directly inconsistent with the parts of the Rule which 1446 FEDERAL TRADE COMMISSIOK DECISIONS

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provide, and which inform the consumer, that hc may cancel without any penalty or obligation. " In addition , the Rule spceifically provides that portions of State laws which permit the imposition of a cancellation fee are "among those which will be considered directly inconsistent."

As a result , all provisions of the body of the UCCC form of notice are preempted by the requirements of the Commission s Rule. If a State should so require, a seller may include in his contracts the State notice in addition to the Commission s summary notice, so long as all State language which is inconsistent with the Rule is stricken in transactions covcred by the Rule. The Commission emphasizes that its application of the preemptive effect of the Rule is limited to the UCCC example presented. Kotice language appearing in other State legislation which is consistent with the Rule is not preempted by the Rule. Inconsistent UCCC notice language may be stricken either by being lined through , or, if satisfactory to the State in question, by being eliminated from contracts covered by the Rule. In appropriate situations a composite notice , if it satisfics the requirements of State law, can also he given. The Commission would not object to a composite which in a manner consistent with the Rule notifies thc buyer of all of thc information contained in its summary notice, including the reference to the attached Kotice of Cancellation form. Such a composite must also comply with the Rule s summary notice requirements as to placement and size of type in the notice. In the interest of uniformity, the Commission encourages UCCC Statcs to dcterminc that the Rule s summary notice would satisfy their State notice requirements. The Commission also recommends (where l,'Teater State rights to consumers are not contemplated) that States amcnd their cooling-off statutes either to provide that the Commission s form of notice may be given in lieu of the State notice or to provide that it become the mandatory State language. In question (2), you asked:

Do the Commission s righi of cancellation forms provide as much as or more protection than the forms required in state statutes following the language and requirements of the UCCC? Because the UCCC provisions misinform buyers of rights l,'Tanted by the Rule, it is the Commission s view that all portions of thc body of the UCCC notice arc preempted. To the extent that language required by the UCCC notice misinforms buyers of rights granted by the Rule, the UCCC form of notice provides less protection than that provided by the Rule.

In question (3), you asked:

ADVISORY OPINIONS 1447

If the answer to question two is yes, may companies a..',sume that use of the FTC notice will be deemed to exempt companies involved in interstate commerce from state statutory requirements as to the form of notice required by the UCCC'?

Since as stated in answer to question 1 , the Commission s Rule preempts the body of the notice requirement contained in state statutes following the UCCC, companies involved in transactions in or affecting commerce in those States must comply with the Rule provision, and if they inc1ude the State s notice the body of it must be lined through.

In question (4), you asked:

If the answer to question two is not yes:

a. Must a company prepare a composite notice combining the appropriate provisions of both the state law and the FTC rule; or b. Will the FTC prepare a modeJ composite of the state law and federal rule which the industry must follow; or c. Do the states have the authority to prepare the composite which the industry must follow?

The Commission s answer to question tWG also responds to question 4. For guidance in other situations , the Commission notes that a se11er" within the scope of the Rule is not required to prepare a composite, although a composite notice is onc way in which both Commission and State requirements might be satisfied. A model composite has not been prepared because of the differences in the notice requirements of the various States and because language acceptable to States which also meets the requirements of the Commission s Rule wil be acceptable for Commission purposes as well. The Commission is wi11ing to accept a composite notice prepared by a State which meets the criteria indicated above. In questions (5) and (6), you asked:

5. In the event that a state with an existing cooling-off statute refuses to recognize the preemptive effect of the FTC' s trade regulation rule, will a company, despite good faith efforts to reconcile the differences between the federal rule and state statute , be prosecuted under the Commission s rule for printing forms in compliance with the state law rather than the FTC rule if such state law is inconsistent with the Rule

6. If the answer to question five is yes, will the remedies sought include providing consumers \l/itl1 the opportunity to rescind sales contracts and to re ive restitution In the absence of a specific factual situation, the Commission cannot define a course of action it might pursue. In general , companies which vioJate the Rule are subject to Commission action, including administrative proceedings and proceedings instituted under Sections 205 and .. . .

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206 of the :\agnuson-Moss Warranty- Federal Trade Commission Improvement Act, when appropriate and in the publie interest. In question (7), you asked:

May DSA advise its member companies that the change in the fourth paragraph lof the Rule s Notice of Cancellation) was merely a technic.l correction that the prior version L enacted by the State of Texas J is not stronger than the final version, and that Texas provision docs not preempt the rule: The Commission s notice of change in the Rule, 38 F.R. 30104 (Nov. 1 1973), stated that the change was "merely ' . . editorial and' . . not intended to create, alter, or revoke any substantive rights or duties provided by the original language of the rule. The Commission, therefore, finds that the Texas provision is consistent with the current provision in the Rule, and that either it or the eurrent provision in the Rule will be aceeptable to the Commission as to sellers subject to the Rule. This editorial change was made to clarify the buyer s obligations, however, and the Commission therefore recommends that States incorporate the eurrent language in the Rule in any required notice of cancellation forms. In questions (8) and (9), you referred to an analysis of the conflict between the Oklahoma cooling-off statute (an adaptation of the UCCC), and the Commission s Rule. The analysis was prepared by James A. :\cCaffrey, Deputy Administrator of the Oklahoma Department of Consumer Affairs. In this connection , you asked: 8. May DSA inform its members that the FTC accepts the interpretation contained in Mr. McCaffrey s analysis

9, May DSA advise our member companies that this composit. form is approved by the FTC for use in Oklahoma?

The Commission observes that Mr. McCaffrey, in his proposed contract notice composite, has provided an example of state required language which, though apparently in conflict with the Rule, could be presented so as to avoid eonflict with its requirements. Rather than deleting " at your residence" from the UCCC notice, he has added the disjunctive "or at a plaee other than the place of husiness of the seller. This language, taken from the definitional section of the Rule, serves to explain types of transactions covered without necessitating the striking of state language.

However, in Mr. :\cCaffrey s proposed composite form of contract notice, buyers would be misinformed that a need exists to provide sellers with a reason for cancellation in transactions subject to the Commission s Rule and that "mailing" constitutes the only pcrmissible ADVISORY OPINIONS 1449

means of cancellation. The Commission, therefore, is unable to approve Mr. McCaffrey s proposed composite contract noticc. Since the UCCC docs not require a Notice of Cancellation form, the need under Oklahoma law for any such composite is not apparent. However, should State law make provision for a composite form which was consistent with the requirements of the Commission s Rule, thc Commission would view such a notice as acceptable. The Commission would of coursc take the same view should consistent State noticc requircments also refcrence rights according buycrs greater protection than those conferred by the Rule.

By dircction of the Commission.

Carespondence Relating to Requst

November 6, 1975 Dcar Mr. Chairman:

This is in rcsponse to your inquiry of October 28, 1975 relating to the petition filed by the Direct Selling Association concerning the Commission s "cooling-off" rule for door-to-door sales and also a request by the Association for an advisory opinion. The Direct Selling Association s petition of July 26, 1974 was considered by the Commission in March, 1975. Thc petition was for amendmcnt of thc Cooling-Off Rule to provide an cxemption from the Rule s notice rcquirements for thosc sellers which givc c1ear and conspicuous notice of an unconditional money-back ,6TUarantee. By letter dated March 20, 1975, a copy of which is enclosed, the Commission notified the Direct Selling Association of its determination that the petition did not warrant commcncement of a proceeding to amend the Rulc.

The rcquest for an advisory opinion from the Direct Selling Association and other generally related questions concerning the preemptive effect of the Commission s Cooling-Off Rule, are collectivcly under study by the staff. The Commission considered the first of such requests in May of this year. It issued an advisory opinion to Mr. Melville W. Feldman relating to the preemptive effect of the Commission s Rule on May 20, 1975 f85 F. C. 1215J. I am advised that the several additional qucstions raised by the Direct Selling Association will be presented to the Commission in the near future. As I am surc you appreciate, questions involving preemption raise difficult and complex issues.

Your continued intcrest in the work of the Commission is greatly apprcciated. I hope that you will not hesitate to call on me if I can bc of further assistance.

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Sincerely,
Isl Lewis A. Engman
Chairman

October 28 , 1975 Dear Chairman Engman:

On January 30, 1975 I wrote to you concerning the failure of the Commission to respond to the petition filed by the Direct Sel1ing Association on July 26, 1974 with regard to the trade regulation rule providing a cooling off period for door-to-door sales. I understand that as of this date the Direct Se1Jing Association has stil1 not received a grant of its request or a denial. As you know , the Committee has before it in S. 642 a provision which would require the Commission to respond within 120 days after the suhmission of a petition. It is just this kind of situation which inclines us to act affirmatively on a time limit proposal.

I would appreciate hearing from you on the Commission s response to either the petition or the request for an advisory opinion filed by the

Direct Sel1ing Association in this matter.
Sincerely yours
Isl WARREN G. MAGNUSON
Chairman