Supplement to Letter of Request June 7 , 1974

Supplement to Letter of Request

June 7 , 1974
Dear Secretary Tobin:
ADVISORY OPINIONS 145

This letter is to supplement the request of the Direct Sening Association for an Advisory Opinion concerning the Commission cooling-off trade regulation rule (16 CFR 429.1). In question seven DSA mistakenly attrihuted statements by a representative of the Texas state consumer credit agency to that of the office of the Texas Attorney General. Please note this correction. Please also note that a representative of the Texas Attorney General has publicly stated that if cal1ed to testify in an action brought in Texas against a company using thc FTC rule notice of cancenation form, he would conclude that the rule is not in compliance with Texas law. Thank you for your consideration.

Very truly yours

/s/ W. Alan Luce Attorney and Director/State and Local Affairs

uttRr of Request

June 6 , 1974

Dear Secretary Tobin:

This letter is submitted on behalf of the Direct Sel1ing Association (DSA) to request an Advisory Opinion on specific matters relating to the Commission s trade regulation rule entitled "Cooling-Off Period For Door-To-Door Sales" (16 CFR 429.1). DSA is the national trade association representing the leading manufacturers, distributors and retailers of products sold in the home.

staff that the state ofDSA has been informed by Commission Oklahoma has raised questions concerning the preemptive effect of the rule on their respective cooling-off statute and the right to interpret and compare provisions contained therein. Prior to this time the industry had assumed that a state law with weaker " j.otice of Cancenation" provisions was totany preempted as to such notice provisions by the trade regulation rulc The validity of this assumption is now in question.

Specificany, Mr. .lmes A. McCaffrey, deputy administrator of the OkJahoma Department of Consumer Affairs, stated in a memorandum entitled "Analysis of The l;niform Consumer Credit Code Buyer Right To Cancel and The Federal Trade Commission Rule on Door-TotheDoor Sales" which is in the possession of Commission staff, fol1owing:

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Questions have arisen as to the appropriat. procdure to be followed by sellers in Oklahoma subject to the jurisdiction of the code and the rule. The rule will not be construed to annul or exempt any seller from complying with the code, except to the extent the code is directly inconsistent with the rule. Further, if any provisions of the coe are more restrictive than the rule, then those code provisions must he followed. Accordingly, seJlers subject to the code and the rule must accord the consumer the great€r of the benefjt.s provided by the code or the rule. Therefore until such time as the Oklahoma legislature should amend the code with respect to home sales, all seller-creditors must comply with those provisions of the code which are not directly inconsistent with the rule. Such compliance cannot be achieved by a seJJer if the complete buyer s right to cancel provided in the coe is given along y,'ith the complete notice of canccllation provided in the rule. It is suggested that one "compositc" notice be given to a buyer; one which provides the most favorable benefits to the consumer and is not directly inconsistent with the rule. (Complete statement enclosed.

DSA has also been informed that various comments and questions reflecting varying positions and interpretations have been received by the FTC staff from state government representatives, including those from Colorado, Connecticut, Indiana, Kentucky, Minnesota, Texas and Wisconsin. Due to the clement of uncertainty as to what notice of cancellation forms are acceptab1c to whom and where, thc negotiation of commercial paper in the direct selling area has become more difficult and, reportedly in some instances , unavailable. It shou1d also be noted that there exists a serious paper shortage making it difficult to easily obtain or print forms that comp1y with the FTC rule and/or state statutory reqoirements, thereby complicating bona fidc compliance attempts. Accordingly, since DSA intends to provide up to date guidance to its membcrs in preparing notice of cancellation forms, the following questions are submitted to the Commission for your advice and guidance:

1. Is the Uniform Consumer Credit Codc (LCCC) notice of cancellation form inconsistent with the FTC notice forms 2. Do the Commission s right of cancellation forms provide much as or more protection than the forms required in state statutes fo11owing the language and requirements of the UCCC? 3. If the ans\ver to question two is yes, may companies assume that usc of the FTC notices will be dccmed to exempt companies involved in interstate commerce from state statutory requirements as to the form of notice required by the UCCC? 4. 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; ADVISORY OPINIONS 1455

b. Wi11 the FTC prcpare a model composite of the state law and federal rule which the industry must fo11ow; or c. Do the states have the authority to prepare the composite from which the industry must fo11ow 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, wi1 a company, despite good faith efforts to reconcile the differences between the federal rule and the state statute, be prosecuted under the Commission s rule for printing forms in eompliance 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, wi11 the remedies sought include providing consumers with the opportunity to rescind sales contracts and to receive restitution?

The fo11owing questions relate to areas genera11y covered above hut are directed at other specific dilemmas facing this association and its members for which DSA needs the Commission s guidance: 7. Please note the reported position of the office of the Attorney General of Texas which in a communication to the Commission staff contends that Texas law (which tracked the rule s notice language prior to the Commission s November 1 , 1973, change of paragraph four of the " otice of Cance11ation ) is stronger than the final FTC language and must therefore be used in Texas in place of the rule language. May DSA advise its member companies that the change in the fourth paragraph was merely a technical correction , that the prior version is not stronger than the final version, and that Texas provision does not preempt the rule 8. Attached is the entire analysis by Mr. McCaffrey, previously a11uded to above, in which the state of Oklahoma contends that certain portions of its code provide more protection to Oklahoma consumers than the Federal rule , May DSA inform its members contained in Mr. that the FTC accepts the interpretation McCaffrey s analysis 9. Also contained in the analysis is a composite notice of cancellation form submitted to the Commission by Oklahoma. May DSA advise our member companies that this composite form is approved by the FTC for use in Oklahoma

Since we intend to advise our companies as to the matters touched upon above as quickly as possible, DSA respectfully requests that the Commission issue an Advisory Opinion as soon as possible to help minimize potential legal and economic liabilities that DSA and other

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direct selling industry companies may face, as well as to help insure that consumers are provided the substantive protections sought by the

rule and various state laws. Thank you.
Respectfully submitted
Isl Neil H. Offen
Vice President and Legal Counsel
Enclosure w LetIRr of ReqUfst
STATE OF OKLAHOMA
DEPARTMENT OF CONSUMER AFFAIRS

3033 North Walnut Avenue

Oklahoma City, Oklahoma 73105

April 17, 1974 In re: Federal Trade Commission Rule on Door to Door Sales.

This wi1 acknowledge receipt of your letter of March 22, 1974 concerning the above rule.

We have received and studied a copy of the Federal Trwl Commission Trwl Regulatwn Inclwling A S!.IRment of Its Basis and Purpose with regard to its impact on the Uniform Consumer Credit Code, hereinafter referred to as "Code . A brief study of such FTC publication reveals irreconcilable confJicts with certain provisions of the Code. Such conflicts have been discussed at length with Ms. Anne Fortney, Attorney, Bureau of Consumer Protection in Washington. Her responsibility is to coordinate resolutions, if any, between state law and the Regulation.

A ttaehed hereto is the analysis made by the Department concerning the Code "Buyer s Right to Cancel" and the FTC Rule. We have furnished the FTC with the same analysis with a request for their observations. If we receive indications of substantial difficulties from the view of the staffers of the FTC, we wi1 notify you as soon as possible. Further, we intend to send this same analysis to each member of industry requesting our interpretation of the FTC Rule. Sincerely,

Isl James A. McCaffrey, Deputy Administrator