Cooling-off Rule is a rule that allows you to cancel a contract within a few days (usually three days) after signing it. As explained by the Federal Trade Commission (FTC), the federal cooling-off rules gives the consumer three days to cancel certain sales for a full refund. The seller is required by law to inform the buyer at the time of the sale about their right to cancel and to provide the buyer with a copy of the sales contract and two copies of the cancellation form. The right to cancel lasts until the midnight of the third business day after the sale.
The FTC’s cooling off rule applies to sale, lease, or rental of consumer goods and services having a value of at least $25, made anywhere other than the seller’s normal place of business. This rule includes sales made at trade shows, conventions and applies even when a salesperson makes a presentation in your home.
However, it does not apply to sales that are made entirely online, via mail, or telephone. Additionally, this rule does not apply to insurance, securities, art/crafts sold at fairs, and automobiles sold directly at temporary locations such as auto shows.
Similarly, many states have laws regarding cooling-off rules. The laws in most states resemble the federal rules mentioned above, while some states have broader rules. For example, Ohio allows cooling-off periods for sales of business opportunity plans and hearing aids in addition to the consumer goods and services covered under the federal cooling-off rule.
[Last updated in June of 2021 by the Wex Definitions Team]