Cancel This Sale! - The Three-Day Rule
By Jeffrey A. Babener
Excerpted from Network Marketing: What You Should
Know, Jeffrey Babener, Legaline Publications
MLM consultant practice tips. MLM Companies are required
to file registrations in a number of states which have adopted MLM Statutes. Specific MLM information must be filed and specific rights for
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Cancel This Sale! - The Three-Day Rule
It's called the 'cooling off rule," and as a network marketing distributor, you're going to have to contend with it every time you pull out a retail sales form.
Over the years, the FTC regulation of direct selling has taken many forms. The commission has adopted policies regulating pyramids, business opportunities, earnings representations, resale price maintenance, and mail order merchandising.
One specific FTC rule, however, goes right to the heart of the activity of every network marketing company and independent distributor. It involves the fundamental aspect of multilevel marketing: the "one-on-one contact,' which is often made in the home of the retail customer.
The FTC has adopted regulations and guidelines on door-to-door sales which every distributor should be aware of. Various state and federal statutes and regulations grant consumers the right to rescind contract under certain circumstances, supplementing their common law rights to revoke contracts in instances of fraud, misrepresentation, mistake, or minority. The FTC rule, entitled "Cooling Off Period for Door-to-Door Sales," is one such regulation. It gives consumers a unilateral right to rescind their purchase agreements without penalty.
Though much confusion has arisen due to inconsistent state laws in the area of door-to-door sales, this rule specifically provides that its purpose is not to preempt such laws, except to the extent that they directly conflict with its provisions.
The FTC defines door-to-door sales as a sale, lease, or rental of goods or services for personal, family, or household use, having a purchase price of $25 or more, in which the seller personally solicits the sale, and the buyer's agreement or offer to purchase is made at a place other than the seller's main or permanent branch office. The rule requires that the door-to-door seller disclose to the buyer the buyer's right to cancel the transaction at any time prior to the third business day (excluding Sundays and holidays) following the actual sales transaction.
Simply stated, the buyer can call the whole thing off within three days. But the seller must let the buyer know this by including the following paragraph in the purchase agreement:
"You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right."
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provider.