Cancellation Procedures and State Law

cancellation procedures

State and federal laws govern business compliance involving contract cancellation procedures. As a result, it is important for fitness facilities and martial arts schools to ensure cancellation rules are compliant with state laws. While state laws provide various cancellation requirements for both the fitness 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.

Right-To-Cancel. According to the Federal Trade Commission (FTC), a fitness facility, or seller, must inform the buyer of their right-to-cancel at the time of sale. Right-to-cancel is the ability to get out of a contract within the first 72 hours, or three days after signing a contract. These are also referred to as “buyer’s remorse.”

Laws governing a consumer’s right to cancel a fitness facility or martial arts school contract vary based on state laws where you do business. FTC regulations may not apply to all types of contracts or businesses in your state.

Contract Cancellation. After the right-to-cancel time period, regular cancellation procedures go into effect. In order to ensure your procedures for cancellation of a contract can be enforced to the full extent of the law, they must comply with state laws. This means, your fitness or martial arts contract verbiage must include statements proscribed by your state’s statutes in order to be enforceable.

A state may require or regulate the following:

Specific verbiage. 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, with a signature line associated to that particular clause.

Duration of a 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 fitness facility or martial arts school contract. Ohio state (and many others) define that a health club contract cannot exceed three years in length.

Allowable cancellation reasons. Some states may govern the allowable reasons a customer can cancel a contract. Types of cancellation reasons that a state may require to be presented on your contract can include: Number of miles a consumer must move to be allowed to cancel; and death or disability provisions.

Other Requirements. Your state statutes may specify other, non-cancellation related requirements, such as customer, facility and sales information to include in a contract, and signature placement on the contract. Ensuring enforceable contracts means also complying with additional state statutes to prevent cancellations for non-policy reasons such as missing information or misplaced signature lines.

In a nutshell, clear cancellation policies, plus state compliance, equals enforceable contracts, which is a win-win.

Susan McLain works for Affiliated Acceptance Corporation and has written for many industries, including sales and use tax, digital signage and financial services. She can be reached at susan.mclain@affiliated.org.

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