What Alarm Companies Should Know About the 3-Day Cancellation Notice
Too often ignored by alarm dealers, the three-day notice of cancellation provision is required in every state. Even if a state hasn’t enacted its own three-day notice of cancellation statute there is a federal law that applies. Failure to comply with this ubiquitous legal requirement is all too common in not only the alarm industry, but other businesses as well.
Noncompliance is often intentional, but also out of ignorance of the legal requirement. Some alarm owners think the law is too difficult to follow or don’t bother using written contracts that comply with the strict requirements of the law or think giving subscribers the cooling off period will result in too many lost sales. Though persistent and intentional disregard for the law may have additional consequence, the failure to comply in almost all cases leaves the subscriber with the right to cancel at any time until the law is complied with, even after the installation is completed.
What exactly is the law? You are required to have a notice in your contract that lets the subscriber know they can cancel the contract without penalty and get a complete refund, provided they cancel within three days (72 hours) of the contract execution. In addition to this 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. (For the form required in your state, you can go to our firm’s Web site at www.kirschenbaumesq.com/noticeofcancel.htm.)
When is the law applicable to you as an alarm dealer? If you think of the law as it is sometimes referred to — the “door-to-door sales act” — you can get a good idea when it applies. It might be easier to explain when it doesn’t apply. The law does not apply to commercial transactions, only for residential subscribers.
Additionally, the law applies only when at least part of the transaction takes place at the residence. So if you have a business office or retail store and the transaction takes place there entirely, no cancellation notice is needed. If any part of the transaction takes place at the residence, then the notice is required. Rule of thumb: If you’ve been to the residence before the contract is signed, for a sales pitch or survey of the premises, then give the cancellation notice.
Can the subscriber waive the cancellation right? The law is sometimes referred to as the “three-day cooling off period” because it affords the subscriber three days to recover from the sharp, persuasive, hard-sell convincing tactics of your salesman. Under those circumstances, it’s odd that the law would permit a waiver. In fact only some jurisdictions permit waiver, others none.
If you are in a jurisdiction that permits a waiver, it typically requires: 1) the waiver be in writing; 2) it be handwritten by the subscriber; 3) it is on a paper separate from the contract form; and 4) states that the subscriber needs you to install your system right away and waives the three-day cooling off period. Not all jurisdictions require all of this, but by adopting this practice, you should be in compliance in those states that permit the waiver.
What happens if you don’t comply with the law? For one thing, the subscriber can cancel at any time and require you to return their home to its condition before you started your work. But of even more concern, the consumer agencies in your state (e.g. Consumer Affairs, attorney general or the agency that licenses your business) could take action against you for deceptive trade practices. This could entail requiring you to give notice to all existing subscribers that they can cancel with you and get refunds, along with fines and penalties.
What’s the bottom line? Comply with the law. One other thought. When you go to sell your subscriber accounts, you may find that your potential buyer will lose interest if you have, as a matter of policy, failed to comply with the law.
Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. (www.kirschenbaumesq.com). His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
The opinions expressed in this column are not necessarily those of SSI, and not intended as legal advice.
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