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Defining cancellation procedures is part of setting up your business policies and procedures when coming on board with AAC. It is important that you ensure your rules are compliant with state laws where you perform business. While state laws provide various cancellation requirements for both the business and the consumer, there are generally two types of cancellations – right-to-cancel during the first three days after signing, and contract cancellation after the first three days.
According to the Federal Trade Commission, a seller must inform the buyer of their right-to-cancel at the time of sale. The right-to-cancel is the ability to get out of a contract within the first 72 hours or 3 days after signing a contract. The right-to-cancel laws are also referred to as “buyer’s remorse.”
Laws governing a consumer’s right to cancel a health club or Martial Arts school contract vary based on state laws where you do business. This Federal law may not apply to all types of contracts or businesses in your state.
For example, in Washington State, the buyer’s right to cancel must be clearly stated on your contract. The provision states that the notification should be in “…conspicuous caption in capital letters and boldface type…” and include specific text as provided in the WA state statute.
After the buyer’s remorse clause time period of three days is passed, your defined policies and procedures with AAC will be followed by AAC representatives. To be able to assert your procedures to the full extent of the law, your policies and procedures must comply with state laws. This means your contract verbiage must include statements according to your state’s statutes in order to be enforceable.
Types of State Requirements
- Specific cancellation procedure verbiage on your contract. Sometimes a state may define the look and feel of cancellation verbiage. For example, Washington State requires the cancellation clause to be in all caps and bold face type and a signature line to be associated with that particular clause. Once signed, that makes the cancellation policy legally binding upon that customer. This verbiage must be included or the contract can be considered void in that state.
- Duration of contract. A contract that goes over the allowed duration of a contract for that state is invalid and likely unenforceable. To ensure you meet state statutes and laws, ensure your contracts do not extend beyond the allowable number of months for a health club or Martial Arts school contract. Ohio state (and many others) define that a health club contract cannot exceed three (3) years in length. Some states reduce that length of allowable time to two (2) years (http://codes.ohio.gov/orc/1345.41 – 1345.50).
- Restriction on allowable reasons for cancellation of a contract. States may govern cancellation reasons that are required to be presented on your contract such as:
- Number of miles a consumer must move to be allowed to cancel; and
- Death or disability provisions
Basic Contract Information
For any contract to be valid, the date of contract and business information must be presented clearly on the contract. In addition, your new member’s details must be clearly shown and signatures obtained for each of the appropriate sections of the contract per state rules. Finally, most states have regulations that require all sale amounts to be clearly shown prior to the consumer signing. Contracts that have sales information filled in after the consumer has signed are generally unenforceable.
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All materials have been prepared for general information purposes only to permit you to learn more about Affiliated Acceptance Corporation and the services we provide. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.