What is the “three day rule”?

What does the three day rule cover?

The three day rule is also called the  “Cooling Off Rule.”

This rule covers  sales contracts made in person at your home, work, or other unusual locations.

The rule is to protect people against being pressured into a sale, contract, or deal.

Some of these may involve people who go door to door to try to get people to buy things or services.

The rule applies to the following sales contracts:

  • A sale of $25 or more done at your home
  • A sale of more than $130 at a temporary place (like a flea market, tent, roadside, etc.)
  • But the sale must be for goods or services mainly for your personal, family, or household use. This includes sale of lessons, other instruction or training courses.

However, this rule does NOT cover the sale if it was:

  • made to meet any emergency
  • made entirely online, by mail, or telephone
  • made after you agreed to the terms at the seller’s permanent place of business that sells the goods or services you bought
  • made because you asked the seller to visit your home to repair or perform maintenance on your personal property.  (Things you buy other than that repair or maintenance request are covered.)
  • involves any real estate, insurance, or securities (like stocks)
  • for a car, van, truck, or other motor vehicle sold at a temporary location, if the seller has at least one permanent place of business
  • for any arts or crafts sold at fairs or places like shopping malls, civic centers, and schools

What information must the seller tell you?

At the time of the sale, the seller has to tell you about your right to cancel the sale.

The seller also must give you:

  • Two copies of a cancelation form. One copy is for you to keep. The other copy is to send to the seller if you decide to cancel your purchase.
  • A copy of your contract or receipt. The contract or receipt should be dated, show the name and address of the seller, and explain your right to cancel.
    • Note: The contract or receipt must be in the same language that was used in the sales presentation.

When can I cancel the contract?

Your right to cancel for a full refund lasts until midnight of the third business day after the date the sale was made or you signed the contract.  Saturday is considered a business day, but Sundays and federal holidays are not. So:

  • If the sale happens on a Monday in a week without a federal holiday, you have until midnight on Thursday to cancel.
  • If the sale happens on a Monday and Tuesday is a federal holiday, you have until midnight on Friday to cancel.
  • If the sale happens on a Friday, you have until midnight on Tuesday to cancel, if there are no federal holidays on Monday or Tuesday.
  • If the sale happens on a Friday and the following Monday is a federal holiday, you have until midnight on Wednesday to cancel. 

Do I need a reason to cancel the sale?

You don’t have to give a reason for canceling.

You have a right to change your mind.

How do I cancel the sale?

  • To cancel a sale, sign and date one copy of the cancellation form. Mail it to the address given for cancellations in the contract or by the seller.  Make sure the envelope is postmarked before midnight of the third business day after the contract date.
  • If the seller didn’t give you cancellation forms, write a cancellation letter. It must be postmarked within three business days of the sale.
  • Send the cancellation form or letter by certified mail or another post office service that includes “tracking” so you can get a report showing when you mailed it and when it was delivered.    Also, keep a copy of the letter or cancelation form or letter for your records.

What happens next?  What does the seller have to do after the cancelation?

The seller has 10 days to

  • cancel and return any check you signed
  • refund all your money
  • return any property you might have traded in
  • tell you if any product you still have will be picked up or abandoned

Within 20 days, the seller must either pick up the items left with you, or reimburse you for mailing expenses if you agree to send back the items.

If the seller gave you any items, you must make them available to the seller in as good condition as when you got them. If you don’t make the items available to the seller — or if you agree to return them but don’t — you still have to pay the seller.

What if the seller does not follow the rules?

If you used a credit card, you can dispute the credit card charges based on the violation of the “FTC Cooling off rule.” See our post on this here.

You can also report the violation the FTC at ReportFraud.ftc.gov.

In some cases you may be able to use the violation as part of a lawsuit.

The information provided on this post does not, and is not intended to, represent legal advice. All information available on this site is for general informational purposes only. If you need legal help, you should contact a lawyer. You may be eligible for our free legal services and can apply by calling our Covid Legal Hotline at 1-844-244-7871 or applying online here.

What credit card charges can I dispute?

If any of the things below happened to you, a Federal law called the Fair Credit Billing Act (FCBA) may be able to help.

  • Did you buy something with a credit card and not get it?
  • Was the thing you received not what you ordered?
  • Have you been charged twice for the same item?

What charges are covered by the Fair Billing Credit Act?

The Fair Billing Credit Act (FCBA) applies to credit cards and accounts with no set schedule to  pay off the whole amount you owe.

This is called an "open end" credit account. Credit cards and revolving charge accounts like department store accounts are open end accounts.

The Fair Billing Credit Act covers these. It doesn’t cover installment loans.

An “installment loan” has a specific a payment schedule, usually paying the same amount each month.

These scheduled payments are usually used for things like cars, homes, furniture, major appliances, and “promissory notes” (like bank loans). 

What does the law do?

The FCBA covers disputes over some  "billing errors":

  • The bill has charges you did not make or let someone else make. (Federal law limits your responsibility for unauthorized charges to $50).
  • The bill has the wrong date or amount.
  • You were billed for things you did not accept or weren't delivered as agreed.
  • Bills with math mistakes;
  • Bills that didn’t record your payments correctly or give you credit for returns.
  • Bills that went to the wrong address. This only applies if the credit card company has notice in writing of your correct address at least 20 days before end of the billing period.
  • You were not given a requested explanation after you requested clarification.
  • You were not given written proof of purchase after you claimed error.

How do I use the law?

  • Write a letter to the address on your statement for "billing inquiries."
  • This usually is not the address where you send payments.
  • Include your name, address, account number, and a description of the billing error.
  • Here is a sample letter from the FTC (Federal Trade Commission).
  • Mail your letter so that it reaches the address within 60 days after the first bill with the error was mailed to you.
  • It’s a good idea to send your letter by certified mail or other post office service that uses tracking you can get a report on.
  • Include copies (not originals) of sales slips or other papers to show the billing mistake or problem.
  • Keep a copy of your dispute letter.

When the credit card company gets your complaint letter, it has 30 days to write saying it got your complaint.

They do not have to say they got the complaint if the problem is fixed within the 30 days.

The credit card company has  two billing cycles (but not more than 90 days) after getting your letter to work out your dispute.

What happens after the letter goes out

After you write to dispute charges the FCBA lets you do some things.

You may withhold payment on the disputed amount (and charges on that amount) during the investigation.

You must pay any part of the bill not in question, including all other finance charges, on the amounts you are not disputing.

The creditor may not take any legal or other action to collect the disputed amount and related charges (including finance charges) during the investigation.

Your account can't be closed or restricted.

The creditor may not threaten your credit rating, report you as delinquent, accelerate your debt, or restrict or close your account because your bill is in dispute or you have used your FCBA rights.

It against federal law for creditors to discriminate against credit applicants who exercise their rights in good faith under the FCBA.

For example, a creditor can’t deny you credit just because you've disputed a bill.

The disputed amount can count against your credit limit.

The creditor may report that you are challenging your bill.

If it turns out that your bill has a mistake, the creditor must explain to you — in writing — the corrections that will be made to your account.

In addition to crediting your account, the creditor must remove all finance charges, late fees, or other charges related to the error.

If the creditor determines that you owe a portion of the disputed amount, it must give you a written explanation. You may request copies of documents proving you owe the money.

If the creditor's investigation finds the bill is correct, you must be told promptly and in writing how much you owe and why. You may ask for copies of relevant documents.

At this point, you'll owe the disputed amount, plus any finance charges from when the amount was in dispute.

You also may have to pay the minimum amount you missed paying because of the dispute.

What happens if I disagree after the creditor investigates my claims?

If you disagree with the results of the investigation, you may write to the creditor.

You must do that within 10 days after receiving the explanation.

You may say that you refuse to pay the disputed amount. But the creditor may now begin collection procedures.

If the creditor reports you to a credit reporting company as delinquent, the report also must say that you don't think you owe the money.

The creditor must tell you who gets these credit reports. The creditor also must promptly report any subsequent end of the reported delinquency to everyone who got a report.

creditor who fails to follow the settlement procedure should deduct $50 from your bill (or the amounts at issue and finance charges on them if they are less than $50).

This $50 rule applies even if the bill turns out to be correct.

For example, if a creditor acknowledges your complaint is too late — or takes too long to resolve a dispute, the penalty applies.

The penalty also applies if a creditor threatens to report — or improperly reports — your failure to pay during the dispute period.

What can I do if I think there has been a violation of the FCBA?

The Federal Trade Commission enforces the FCBA for most creditors except banks.

If you think a creditor has violated the FCBA, file a complaint with the Federal Trade Commission.

You also can sue a creditor who violates the FCBA.

If you win in court, you may be awarded damages, plus twice the amount of any finance charge — as long as it's between $500 and $5,000, or higher amounts if a pattern or practice of violations is established.

The court also may order the creditor to pay your attorney's fees and costs.

If possible, hire a lawyer who is willing to accept the awarded to you by the court as the entire fee for representing you.

Some lawyers may not take your case unless you agree to pay their fee — win or lose — or make you add to the court-awarded amount if they think it's too low.

What if the complaint is about the quality of the goods or services purchased?

Disputes about the quality of goods and services are not "billing errors."

The dispute procedure above doesn’t apply to complaints about the quality of goods or services.

If you have a problem with goods or services you paid for with a credit or charge card, you can take the same legal actions against the card issuer as you can take under state law against the seller.

You can only use this protection, if you must have made the purchase in your home state or within 100 miles of your current billing address and the amount charged was more than $50.

You must make a good faith effort to resolve the dispute with the seller first.

The dollar and distance limitations don't apply if the seller is the credit card issuer, or if a special business relationship exists between the seller and the credit card issuer.

Because of this right to sue, the card issuer may be willing to remove a charge that you challenge. But the FCBA procedures above will not apply.

What about other billing rights that I may have?

Businesses that offer "open end" credit, like credit cards, also must do these things:

  • The company must give you a written notice about your right to dispute billing errors when you open a new account and from time to time
  • The company must send a statement for each billing period in which you owe — or they owe you — more than one dollar or on which you have been charged a finance charge
  • A credit card company must send your bill at least 21 days before your credit card payment is due.
  • An open end credit company must send the bill before any grace period expires and finance charges are imposed (for open end credit). The bill must go out at least 14 days before a minimum payment is due to avoid being late (even if there is no grace period).
  • The company must credit all payments to your account on the date they're received, unless no extra charges would result if they failed to do so.
  • Creditors can set reasonable rules for making payments, like setting a reasonable deadline for payment to be received to be credited on the same date, if the time is not earlier than 5 p.m.
  • The company must promptly credit or refund overpayments and other amounts owed to your account when it owes you more than one dollar.
  • If you prefer a refund, it must be sent within seven business days after the creditor receives your written request.
  • The creditor also must make a good faith effort to refund a credit balance that has remained on your account for more than six months.

What if I instead call the credit card company to dispute the charge?

Credit card statements have a number to call about problems with the bill.

Many people call the number when they see a mistake. This may solve most problems.

Schedule a reminder to make sure the problem is fixed within 45 days of the bill that had the problem.

If it is not fixed, send the letter described above so that the letter will get to the credit card company within 60 days of the bill with the problem.