Information on the 3 Day Right to Cancel
The Prepaid Entertainment Contract Act
O.R.C. 1345.41 et seq.
Have you ever been talked into signing up for a dance class, a dating service or martial arts classes? What about the health spa membership that you were intimidated into purchasing and will never use? The Prepaid Entertainment Contract Act may be of interest to you. The following information is designed to empower you in situations involving these types of contracts.
The Prepaid Entertainment Contract Act (PECA) provides significant protection for purchasers of contracts involving health spas, dance studios, martial arts training, dating services and weight reduction centers. The Act now applies to any contract for the specified services, regardless of the cost of the contract or the duration of the program. While the contract must still be "prepaid" the Act now applies to any contract for the such specials as "$20 for 20 visits" at health spas, $5-a-week diet programs if there is any payment in advance of receiving the services, and six to eight week exercise classes.
Question: What kinds of contracts does the Act cover?
Four specific types of services are covered under the Act and meet the definition of a "prepaid entertainment contract"
- 1. Dance studio lessons. This includes private and group lessons for any type of dancing and any related services.
- 2. Dating Services. At this time no cases have been decided which define the definition of R.C.1345.41(A)(2). This could be due in part to the relatively recent proliferation of these services or the reluctance of participants to come forward after being wronged by a dating service.
(3) Martial arts training. This includes any type of marital arts training, conditioning, self-defense, physical fitness or similar types of programs.
(4) Health Spas and Weight Reduction Programs. The definition provided at R.C. 1345.41(A)(4) includes contracts for instruction, training, or assistance for a number of different activities including physical culture, body building, exercising, reducing, figure development or any similar activity.
Question: What is not covered by the act?
The Act does have some major deficiencies which have not been addressed by the Ohio Legislature. For instance, that long-term video club rental and the lifetime tanning contract are not contemplated by the Act. The Act also excludes any weight reduction program administered by a doctor. The legislature specifically excluded non-profit institutions and political subdivisions. This means that the local YMCA and community dance classes are not covered by the Act.
Question: What does the act prohibit?
R.C. 1345.42(B)(1) requires that every prepaid entertainment contract be in writing in order to be enforced. R.C. 1345.42(B)(1) also requires that both parties sign the contract and that the date must appear on the contract. In an effort to protect the consumer from exploitation and intimidation the legislature enacted R.C. 1345.42(B)(4), a provision which requires the prepaid entertainment contract to contain language that states that the personal data will be returned to the buyer within thirty days of termination of the contract. Other provisions which the contract must contain include:
R.C. 1345.42(B)(6); contract must specify that the contracted services will begin no later than 180 days from the date of the contract is entered into;
R.C. 1345.42(B)(7); a prepaid contract must contain a provision granting the consumer certain rights if he moves more than 25 miles away from the facility;
R.C. 1345.42(B)(8); a prepaid contract must contain a provision describing the consumer's rights if the supplier relocates or closes the facility;
R.C. 1345.43(A); the contract must provide notice of the buyer's right to cancel;
R.C. 1345.42(A)(9); no prepaid entertainment contract may require a buyer to prepay more than fifty dollars or 10% of the total contract price, whichever is smaller, if the facility is not open at the time the contract is signed;
R.C. 1344(D)(1) prohibits contract provisions which require the consumer to confess judgment upon default. This section of law also prohibits any provision which requires the consumer to waive any rights which arise under this Act.
The most important right granted by the act is the three-day cooling off period. P.E.C.A. is largely devoted to specifying when and under what circumstances that the consumer can cancel the transaction. The three-day cooling off period gives the consumer the right to cancel for any reason within the first three days. As stated above, R.C. 1345.43(A) requires that the notice of right to cancel must appear on all notes or other evidences of indebtedness. R.C. 1345.44 provides that the written notice of cancellation form must be attached to the contract. In addition, R.C. 1345.44(D)(2) requires that the seller orally inform the buyer of his right to cancel the transaction. This oral notice must be given at the time the contract is signed.
Question: What if my contract is ten years-old and the supplier has not complied with these provision?
According to R.C. 1345.44(C) the period within which a buyer may cancel the contract does not begin to run until the seller has complied with R.C. 1345.44(A) and R.C. 1345.44(B). These sections require that the contract be dated when signed and that a proper notice of cancellation form be completed and attached to the contract. If the seller has not complied then the right to cancel continues forever unless the seller corrects his error.
Question: How do I properly notify the supplier of my intent to cancel?
The P.E.C.A. specifies the method, the form and the place where cancellation may occur. Pursuant to R.C. 1345.44(D)(4), the seller is under a duty to honor any valid notice of cancellation and refund all payments made by the consumer (except for $10.00). Within thirty days the seller must return any documentation containing the consumer's personal or private facts. The seller must retain the notice of cancellation for the period in which an action to enforce the contract could be commenced.
METHOD: Pursuant to R.C. 1345.43(A), 1345.44(B)(1) and 1345.44(C) a consumer may exercise his right to cancel by 1) certified mail, return receipt requested, 2) personal or manual delivery, or 3) telegram.
FORM: According to R.C. 1345.43(A), 1345.44(B)(1), a consumer may use any written form to effect a cancellation so long as it expresses his intention not to be bound by the contract.
PLACE: R.C. 1345.44(A), 1345.44(B)(1) authorize the consumer to send or deliver the notice of cancellation to any facility which he is entitled to use under the contract.
Question: What are my remedies if the supplier did not comply with the law?
If the seller fails to honor a valid notice of cancellation and refund all payments (except ten dollars) the buyer may file an action to recover double damages and attorney fees. Any other violation of the act may be treated as an unfair and deceptive act or practice under 1345.02. This allows the consumer to rely on the Consumer Sales Practices Act and may allow treble (3x) damages, attorney fees, rescission, actual damages, statutory damages, injunctive or declaratory relief.