We’ve all experienced it: buyer’s remorse. You bought something you really didn’t want, or perhaps you signed up for a long-term contract you can’t afford.
Sometimes you’re stuck. But not always.
Under federal and state laws there are certain purchases that require a “cooling-off period,” or give consumers the right to cancel within a certain period of time. But they are not universal, so it’s important to understand when you have these rights — and when you don’t.
3-Day Cooling-Off Rule
This rule, which dates back to the 1970s when perhaps door-to-door sales were more common, provides a three-day cooling-off period for purchases of more than $25 that are made via door-to-door sales, as well as sales made in a temporary business location such as convention centers or hotel rooms. Under the Cooling-Off Rule, you have the right to cancel the qualifying purchase for any reason at all.
Under this rule, the salesperson is required to tell you about your right to cancel, give you two copies of a cancellation form (one to keep and one to return with the item) and a copy of your contract or receipt. The contract or receipt that you are given should list the date of the sale, and include the name and address of the seller. (Otherwise, how would you know where to return the merchandise?)
What happens if they didn’t give you this information? According to the Texas attorney general’s office, “If the salesperson did not provide a cancellation form, you may still cancel your contract. Because the seller violated the law by not providing the form, you have extra time. But remember, you must cancel in writing. Be sure to keep a copy of the contract and your letter notifying the seller of the cancellation. It is a good idea to get this done as soon as possible.”
Unfortunately, though, the Cooling-Off Rule doesn’t apply to all purchases. Those made for business purposes, for examples aren’t covered, nor are those made exclusively by telephone, Internet or the mail.
And that’s where a lot of the problems occur, says Bonnie Patten, executive director at TruthInAdvertising.org. She says that one of the common complaints her organization hears involves consumers who sign up for a “free trial” of a product, only to discover that they will be charged on a recurring basis for additional product. These companies typically advertise that consumers can cancel if they aren’t satisfied, but “they limit it to such a short period of time that it’s nearly impossible to get out of it,” she warns.
Credit Card Purchases
Contrary to what many cardholders perceive, using a credit card does not automatically entitle you to a refund if you change your mind about a purchase or want to cancel a service being billed on a recurring basis on your credit card.
A consumer signs up for something and says “I’ll put it on my credit card,” says Mychal Wilson, attorney at the Law Office of MychalWilsonEsq.com, “and then I will just cancel my credit card to get out of the contract. But what happens is the vendor or seller generally will have your Social Security number so once you cancel that credit card, the account will then be referred to a collection agency. At that point they can report it to a credit reporting agency, so you are hurting your credit.”
But credit cards do give you the right to dispute certain types of charges; for example, if the goods or services you bought were not delivered as agreed, which can include situations where a seller materially misrepresented them.
You also have rights under the “claims and defenses” section of the Truth In Lending Act to withhold payment for certain types of credit card charges (but not those made with a debit card). To assert claims and defenses, the charge must be for $50 or more, the purchase must have been made within your home state or within 100 miles of your billing address, and you have to have made a good faith attempt to resolve the problem with the merchant. If you’ve already paid off in full the bill on which the charge appeared, you cannot assert this right.
Buyer’s remorse would not be a reason for withholding payment under this section of the law, however. Instead, it applies to situations in which you have a valid claim against the merchant. Essentially, the credit card company is standing in for the merchant when you dispute a charge this way.
Most consumers, and even many credit card company customer service reps, aren’t familiar with this protection, however. In fact the California attorney general’s office says in one of its consumer publications, “Be aware that many customer service representatives are not familiar with claims and defenses. Some representatives have denied valid claims and defenses which otherwise meet all of the requirements.”
Credit repair firms sometimes charge consumers hundreds, even thousands, of dollars to help people improve their credit scores. Before you hire a credit repair company, remember that a federal law, the Credit Repair Organizations Act, requires that these firms provide certain disclosures and that they offer a three-day right to cancel without any charge. They must give you a written contract that describes the services they will perform, explain how much it will cost, and describe any guarantees they make.
Before you sign up for pricey credit repair services, be sure to get your free annual credit reports and check your free credit scores. There is a lot you can do on your own to build or rebuild your credit.
Right of Rescission
Under the Truth In Lending Act, the same law mentioned above for credit card disputes, you may have the right to “rescind” or cancel certain mortgage transactions involving the home that is considered your principal residence. (A second home, rental property or commercial property used for business would not qualify, for example.)
This right of rescission gives you three business days to back out of most loans secured by your principal residence, though it doesn’t include a mortgage obtained to purchase a principal residence. It does include most home equity loans and loans to refinance your home, provided you aren’t refinancing with the same lender.
You must be given a notice explaining your right to rescind (if the loan is covered by this right) and information on how to exercise that right. If the lender was supposed to provide you with the right of rescission notice but never did, you have up to three years or until you sell your home, whichever comes first, to rescind the transaction.
With timeshare purchases, the right of rescission is governed by state laws, and the time period to exercise this right is usually between three and 10 days. If you have given into a high-pressure sales pitch for a time share without taking time to carefully consider the purchase first (not a good idea!) you may be able to cancel, but you’ll need to act quickly. (It’s not a given that you will be able to cancel, however. Again, it depends on the law in the state in which the timeshare is purchased.)
Read the contract carefully, including the provisions regarding the right to cancel. Follow the instructions provided to the letter. You will likely need to notify the seller in writing that you are canceling, and you always want to do that by certified mail, and keep a copy of your notice and the receipt in a safe place.
Retailer Refund Policies
Some retailers have excellent refund policies that allow customers considerable leeway in returning merchandise. Before you make a purchase, check the refund policy and make sure you keep a copy of your receipt. Also be sure to get a gift receipt if you plan to give the item to someone else.
Many states have laws that cover certain types of purchases or service contracts such as gym or health club memberships, funeral contracts, home improvement contracts and others. Check with your state attorney general’s office. Read your contract and take your time before making a decision. Waiting a few days — or even weeks — before making a decision will minimize the chance that you will regret it.
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