Door-to-Door Sales and the FTC Home Solicitation Sales Act
So a contractor gets a call from a frantic homeowner in Massachusetts. She pleads with the contractor to come out right away and fix something. She says it is an emergency! The CNN “Severe Weather Forecast” predicted more heavy snow and warned that some roofs may need to be shoveled off.
The contractor arrives to check out the situation; there is no real emergency but the owner is plainly motivated to hire the contractor to do building maintenance tasks right away. On the spot, the contractor sees an opportunity to make an easy buck, writes out a contract for $999, the owner happily signs (after all, she thinks it is an emergency), and the contractor gets started right away.
Either not thinking about it or thinking that a) because the cost of the job was under $1,000; or b) because the services were technically not construction services; or c) because the owner said it was an emergency, the contractor did not provide the homeowner with the statutory 3-Day Notice of Cancellation Form. Big Mistake!
Later that day the homeowner pays the $999 in cash and is given a receipt for the work. She comments that it didn’t take as long as she thought it would but does not object. Four days later the homeowner hears from her regular lawn service contractor that he would have only charged $150 to clear the snow. She calls the contractor back and asks why it had cost so much. The contractor said that it was because of the emergency. He declines to adjust the price even though the job took only 2 man-hours.
What’s Wrong with this Picture?
- The contract is a door-to-door sale under Federal and State law.
- A door-to-door sale is any sale which is consummated at a place other than the seller’s primary business location.
- In Massachusetts, the seller in any door-to-door sale over $25 for personal, family or household use must give the buyer the statutory 3-Day Notice of Cancellation Form in duplicate.
- The situation was not a bona fide emergency.
- The contractor did not inform the homeowner that the job would only take about 2 man-hours.
What Should Have Happened?
- The contractor should always provide the statutory 3-Day Notice of Cancellation Form in duplicate with contracts consummated anywhere but the office.
- Work should not start until the expiration of the statutory 3-Day right of rescission for door-to-door sales.
- The contractor probably should have disclosed that the work did not really amount to a bona fide emergency.
- The contractor should have disclosed that the work might only involve a couple of man hours; this is what we call a “material fact.”
- If the contractor believed that there was a bona fide emergency and the work needed to be done before the 3 day Right of Rescission expired, the owner would have to handwrite a request to deal with the emergency and specifically waive her right to rely on the statutory 3-Day right to cancel.
What Can the Homeowner Do?
- Send the contractor a letter via Certified or Registered mail stating simply that she did not receive the statutory 3-Day Notice of Cancellation, that the purpose of the letter was to cancel the entire transaction, and that she would like her money returned. The law says that the contractor must return the money in 10 days.
- Even if the homeowner has waited more than 3 days to cancel, under the Massachusetts’ statute the cancellation can be sent at any time until 3 days after receiving the statutory Notice of Cancellation from the contractor.
What is this Crazy Law? I Never Heard of It Before.
Federal Law enacted in 1972 (Cooling-Off Period for Door-to-Door Sales 16 CFR 429.1 et seq.) declares that in connection with a door to door sale, it is an unfair or deceptive act or practice to fail to provide to the buyer a mandatory Notice of Cancellation or to fail to notify the buyer orally of her right to cancel. 16 CFR 429.1(e). Federal law also declares it a separate unfair act or practice to fail or refuse to honor any valid Notice of Cancellation within 10 days and refund all payments made. 16 CFR 429.1(f). Under federal law a “door to door” sale is defined as a sale of consumer services with a purchase price of $25 at a place other than the place of business of the seller.
In Massachusetts, door to door sales are governed by MGL c. 93, § 48 and by 940 CMR 3.09. Such sales are simply defined as: ”An agreement providing for the sale or lease of goods, or the rendering of services, or both, primarily for personal, family or household purposes in excess of twenty-five dollars in value and which is consummated by a party thereto at a place other than the address of the seller or lessor. . .” [i]
It is a violation of law to fail to provide two copies of the statutory form Notice of Cancellation to the buyer with the contract at the time of the sale. It is a violation of law to fail to inform the buyer orally of her right to cancel the sale within 3 business days. These violations, without more, not only constitute per se violations of MGL c. 93A[ii] but have also been declared criminal acts by the MA legislature.[iii]
Once the contractor is mailed a Notice of Cancellation letter voiding the contract, failure to return funds is yet another violation of the law and again constitutes an unfair act or practice. MGL c. 93, § 48(d) states that: “In the event of cancellation pursuant to this section the seller or lessor shall within ten business days of the receipt of any valid notice of cancellation (i) refund all payments made, including any down payment made under the agreement. . .” (emphasis added)
Under both Federal and Massachusetts’ law, it is no defense that a consumer solicited or even pleaded with the contractor to do the work. The only applicable exception for bona fide emergencies still requires that the contractor orally and in writing provide the 3 day Notice of Cancellation. The emergency exception expressly requires that, “the buyer furnishes the seller with a separate dated and signed personal statement in the buyer’s handwriting describing the situation requiring immediate remedy and expressly acknowledging and waiving the right to cancel the sale within three business days.” MGL c. 93, § 48(k).
Clearly, the contractor in this story did not request this statement nor ever mention a 3 day right to cancel. What about the fact that the work was done and there was no complaint about the work? The statute provides a forfeiture provision: “A seller of services shall not commence such service during the three business day cancellation period, and the buyer shall not be responsible for the value of work performed during such period, in the event of cancellation.” MGL c. 93, § 48(j).
The regulations promulgated by the Massachusetts Attorney General specify certain acts and practices to be unfair and deceptive under c. 93A. 940 CMR 3.00 et seq. For example practices which further violate c. 93A are listed in the regulations, 940 CMR 3.09 including: “(t)he failure to make any representation, in the sale, offering for sale, advertising, or distributing for sale, or in any other manner, including the failure to adequately disclose additional relevant information, which has the capacity, tendency or effect of misleading or deceiving purchasers or prospective purchasers with respect to any material aspect of the product or transaction or any service to be performed in conjunction with the purchase of the product or service which the seller is advertising, selling, offering for sale or distributing for sale” (emphasis added)
In Massachusetts, licensed contractors are already familiar with the 3 day Notice of Cancellation requirement. The Home Improvement Contractor Act requires inclusion of the same MGL c. 93, § 48 Notice of Cancellation with respect to home improvement contracts over $1,000. It is reasonable to conclude that omission of the Notice by this contractor was a knowing omission, and as such relevant to the violations of c. 93A. Refusing to refund the money in full after receiving the Notice of Cancellation from the homeowner in light of the law is likely to be considered another willful violation of c. 93A.
Among other things, the Massachusetts’ Consumer Protection Act (c. 93A) exposes the contractor to liability for punitive damages (triple damages) and attorney’s fees if the homeowner decides to pursue the case. This type of practice also invites complaints to the Attorney General, the contractor licensing board, and the Better Business Bureau. This could amount to a lot of cost and trouble for the contractor over a quick buck.
[i] An agreement providing for the sale or lease of goods, or the rendering of services, or both, primarily for personal, family or household purposes in excess of twenty-five dollars in value and which is consummated by a party thereto at a place other than the address of the seller or lessor, which may be his main office or branch thereof, may be canceled by the buyer for other than the seller’s or lessor’s breach, whether or not such agreement contains a provision for periodic payments or an extension of credit, provided the buyer, not later than midnight of the third business day following execution of the agreement, notifies the seller or lessor that he is canceling, and such cancellation shall be effective thereupon. MGL c. 93, § 48(a)
[ii] MGL c. 93, § 48(f).
[iii] MGL c. 93, § 48(e).