The Cooling Off Rule and Why You Should Care

The “cooling off rule” is a term referring to a law regarding newly-entered contracts that allows both sides of the party a period of time (after a contract has been signed) to release themselves from any obligations to that contract without penalty.

The reason you should be aware of this law is because many of your competitors, and perhaps even your own sales personnel, use door-to-door sales pitches to convert prospects to customers. In that situation, you (the seller) must inform buyers of their right to cancel the sale and receive a full refund within three business days.

While many alarm company owners know about and understand the law, some are non-compliant because they’re afraid it will hurt their sales figures.  Others have trouble because their sales practices are less sophisticated and they tend not to use legal contracts that would outline the strict requirements of the law. Regardless of the reason, if you fail to comply with informing your buyer of the rule, your new subscriber retains the right to cancel at any time until the law is complied with, even after the installation is completed.

Furthermore, your subscriber can also require you to return their home to its condition before you started your work. Another grave concern is that you could also be liable for deceptive trade practices. If a state agency comes after you, you’ll be susceptible to fines and penalties.

Therefore, it is imperative to ensure you have a notice in your contract (and use a contract!) that lets the subscriber know they can cancel without penalty and get a complete refund, provided they cancel within three days (72 hours) of the contract execution. In addition to this written notice, you are required to provide the subscriber a cancellation form, which is to have your address, the date of the contract and when the subscriber must act to cancel.

While there are certain situations in which the Cooling-Off Rule does not apply, it is important to understand that in our industry, if you’ve been to the residence at any time before the contract is signed, for a sales pitch or survey of the premises, then you need to be compliant.

If you have any questions about the laws in your particular state, you should call your state’s consumer protection agency to find out what kinds of contracts can be canceled without penalty. Read more here.