Submission Number: 563691-00020
Received: 1/21/2013 4:36:29 PM
Commenter: Jeff Sovern
Organization: St. John's University School of Law
State: New York
Agency: Federal Trade Commission
Initiative: 16 CFR Part 429; Rule Concerning Cooling-Off Period For Sales Made At Homes Or At Certain Other Locations; FTC File No. P087109
Attachments: No Attachments
I recently completed a draft of an article on cooling-off period rules titled "Written Notice of Cooling-Off Periods: A Forty-Year Natural Experiment in Illusory Consumer Protection and the Relative Effectiveness of Oral and Written Disclosures." The draft is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2103807. It has been referenced in op-eds I published in The New York Times (available at http://www.nytimes.com/2012/07/19/opinion/a-guide-for-the-new-mortgage-form.html?_r=0) and the Pittsburgh Post-Gazette (available at http://www.post-gazette.com/stories/business/opinion/business-forum-make-sure-consumers-use-protection-rules-662488/), and I have been invited to present the paper at the annual conference of the American Council on Consumer Interests in April. Here is the abstract:
For more than forty years, a standard tool in the consumer protection tool box has been the cooling off period. Federal statutes, state statutes, and federal regulations all oblige merchants to give consumers three days to rescind certain contracts. This paper reports on a survey of businesses subject to such cooling-off periods. The study has two principal findings. First, the respondents indicated that few consumers rescind their purchases. Thus, the study raises doubts about whether cooling-off periods benefit consumers or whether they provide only illusory consumer protection.
Second, the study found that consumers who receive both oral and written notice of their rights are more likely to avail themselves of those rights than those who receive only written notices, and that the differences are statistically significant. Fifty-three percent of the Sellers who gave only a written notice and did not speak of the buyer’s right to cancel said buyers never cancelled, nearly double the percentage for sellers who did tell buyers (27%). Businesses that provided both oral in-person and written notices of the right to rescind were more than twice as likely to report that more than 1% of their customers cancelled contracts as those that provided only written notices. The article offers speculations about why cooling-off periods have been of such little value to consumers, and why oral and written notice combined have been more effective than written alone.
Finally, the survey asked respondents about the cost of cooling-off periods. More than four-fifths of the respondents who answered the question reported that the right to cancel had cost them either nothing or very little. This contrasts with the vehement opposition of opponents of such rules when they were first adopted in the 1960s and 1970s.
I hope you find the article helpful.