When legislative bodies (usually in election years) act to protect consumers from the perils of the marketplace, two of the tools they regularly use are disclosure and rescission.
The idea behind disclosure is that, given enough information, people are less likely to do foolish things with their money.
The idea behind rescission is that, after succumbing to a sales pitch, people need a cooling-off period.
There are many state and federal laws that are heavy on disclosure. They include, notably, the Truth In Lending Act, the Real Estate Settlement Procedures Act and the Electronic Fund Transfer Act.
The list of rescission rights created by statutes also is lengthy. Among them:
- First mortgage refinance loans and home equity loans. They're subject to a three-day right to rescind under the Truth In Lending Act. Loans to buy a home are excluded.
- Service members. Under the Servicemembers Civil Relief Act, enlistees or active- duty personnel who receive orders to a new duty station can cancel a residential lease or a car lease without an early termination penalty.
- Door-to-door sales. Under a Federal Trade Commission rule, a sale of $25 or more resulting from a solicitation at a residence can be rescinded within three business days of the sale.
- Telemarketing sales. Under the Colorado Consumer Protection Act, purchases made over the phone in response to an unsolicited call can be rescinded for up to three business days after receipt of the goods or services.
- Time shares. Under the Colorado Consumer Protection Act, time share buyers have five calendar days to rescind their purchase. Same thing for contracts for time share resale services.
- Health club memberships. Under the state's Consumer Protection Act, health club contracts can be canceled within three business days of signing the contract (they can also be canceled at death, which seems reasonable since dead people don't usually exercise).
- Sale of home to "equity purchaser." Under the state consumer law, a contract to sell a home to an equity purchaser - someone who invests in homes in foreclosure - may be canceled up until the earlier of midnight of the third business day after the contract date or noon on the day immediately preceding the foreclosure sale.
- Credit repair contracts. Under the Colorado Credit Services Organization Act, a credit repair contract can be canceled within five business days of the contract date.
- Charitable gifts. Under the Colorado Charitable Solicitations Act, there's a one-business-day right to rescind gifts of tangible personal property (such as your old car) and a three-business-day right to rescind monetary pledges.
- Hearing aids. Under the Colorado Consumer Protection Act, hearing aid buyers have a 30-day right to cancel.
- Viatical settlements (sale of a life insurance policy to an investor who will receive death benefits when the insured dies). Under the Colorado Viatical Settlements Act, a contract can be canceled within the earlier of 30 days from signing or 15 days from receipt of the sale proceeds.
- Roofing contracts. Under a 2012 Colorado law, a roofing contract can be canceled within 72 hours of signing. There's a second opportunity to cancel if an insurance company says it won't pay for the work.
Unfortunately, contrary to popular belief and wishful thinking, there's no legal right to rescind a motor vehicle purchase contract.
Jim Flynn is with the Colorado Springs firm of Flynn & Wright LLC. Email him at email@example.com or via his website, jtflynn.com.