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The following information will help you comply with the Rules.
What You Should Know Before You Make a Shipment Representation
When you offer to sell mail or telephone order merchandise, you must have a "reasonable basis" for:
Whenever you change the shipment date by providing a delay notice, you must have a "reasonable basis" for:
When you take orders by telephone, you may choose to provide prospective customers with updated shipment information. This may differ from what you said or implied about the shipment time in your advertising. The updated shipment information you provide on the telephone supersedes any shipment representation you made in the advertising. You also must have a reasonable basis for the updated shipment representation.
"Reasonable basis" means that the merchant has, at the time of making the representation, such information as would under the circumstances satisfy a reasonable and prudent businessperson, acting in good faith, that the representation is true.
The evidence you need to demonstrate the reasonableness of your shipment representations varies with circumstances. The following, however, is important:
Remember: Whether you make a shipment representation or rely on the 30-day rule, your advertising should be unambiguous about when you will ship.
What You Must Know Before Making Shipment Representations in Sales Involving Credit Applications
If your customers apply to you to establish an in-house new credit account or increase an existing credit line to pay for the merchandise they order, the Rule provides the following:
When Your Fulfillment Or Other Obligations Begin ("Properly Completed" Orders)
The "clock" on your obligation to ship or take other action under the Rule begins as soon as you receive a "properly completed" order. An order is properly completed when you receive the correct full or partial (in whatever form you accept) payment, accompanied by all the information you need to fill the order. Payment may be by cash, check, money order, the customer's authorization to charge an existing account (including one you have created for the customer), the customer's application to you for credit to pay for the order, or any substitute for these transactions that you accept.
It is irrelevant when you post or deposit payment, when checks clear, or when your bank credits your account. The clock begins to run when you receive a properly completed order.
Note, however, that if a customer's check is returned or a customer is refused credit, the Rule stops the shipment clock. It is reset at day one when the customer gives you cash, the customer's check is honored, or you receive notice that the customer qualifies for credit. At this point, you may take the amount of time you originally stated to fulfill the order.
What You Must Do If You Learn You Cannot Ship on Time
When you learn that you cannot ship on time, you must decide whether you will ever be able to ship the order. If you decide that you cannot, you must promptly cancel the order and make a full refund.
If you decide you can ship the order later, you must seek the customer's consent to the delay. You may use whatever means you wish to do thissuch as the telephone or the mailas long as you notify the customer of the delay reasonably quickly. The customer must have sufficient advance notification to make a meaningful decision to consent to the delay or cancel the order.
Some businesses adopt internal deadlines that are earlier than those set by the Rule to ensure that their delay notices give all customers a meaningful opportunity to consent to the delay. If businesses fail to ship or give delay notifications by their internal deadlines, they automatically cancel the orders and make refunds.
In any event, no notification to the customer can take longer than the time you originally promised or, if no time was promised, 30 days. If you cannot ship the order or provide the notice within this time, you must cancel the order and make a prompt refund.
What a First Delay Option Notice Must Say
In seeking your customer's consent to delay, the first delay notice you provide to the customer (the "delay option" notice) must include:
If your first delay option notice provides a definite revised shipping date of 30 days or less, you must inform customers that their non-response will be treated as a consent to the delay.
Thus, your delay option notice might look something like this:
If your first delay option provides a definite revised shipping date more than 30 days or states that you do not know when you will be able to ship, you must tell your customers that if they do not respond, the order will be canceled automatically within the originally promised time plus 30 days.
For example, suppose you have a reasonable basis for being able to ship in 30 days and you have chosen to make no shipment representation in your advertising. Within the 30 day period after you receive the customer's properly completed order you learn that you cannot ship in time and, although you believe you will be able to ship at some point, you don't know when. Your delay option notice to the customer might look something like this:
Remember: You are required to explain the nature of the backorder problem only if you provide an indefinite revised shipment date. This explanation should be detailed enough to permit the customer to judge what the possible length of the delay might be.
You also have the option of seeking your customer's affirmative agreement to the delay. In any event, you must indicate what will happen if the customer does not respond.
What Later Notices Must Say
If you cannot ship the merchandise by the definite revised shipment date included in your most recent delay option notice, before that date you must seek the consent of your customers to any further delay. You must do this by providing customers a "renewed" delay option notice. A renewed delay option notice is similar in many ways to the first delay option notice. One important difference: the customer's silence may not be treated as a consent to delay.
A renewed delay option notice must include:
If you have provided an appropriate and timely delay option notice and the customer agrees to an indefinite revised shipment date, no additional delay notices are required.
When You May Cancel an Order
Instead of seeking the customer's consent to delay, you can always cancel the order and send a refund. In that case, you must notify the customer and send the refund within the time you would have sent any delay notice required by the Rule.
When You Must Cancel an Order
You must cancel an order and provide a prompt refund when:
How Quickly You Must Make a Refund
When you must make a Rule-required refund, the following applies:
How Much You Must Refund
If you cannot ship any of the merchandise ordered by the customer, you must refund the entire amount the customer "tendered," including any shipping, handling, insurance, or other costs. If you ship some, but not all, of the merchandise ordered, you must refund the difference between the total amount paid and the amount the customer would have paid, according to your ordering instructions, for the shipped items only.
For example, if you charge a flat fee for shipping and handling regardless of the total number or cost of the items ordered, you need not refund any shipping and handling charges if you ship some items. On the other hand, if your shipping and handling charges are indexed to the number of items or the dollar amount of the order, you can keep only those shipping and handling charges that are appropriate to the number or dollar amount of the items actually shipped.
When making Rule-required refunds, you cannot substitute credit toward future purchases, credit vouchers, or scrip.
When the order is paid for in whole or in part by proofs of purchase, coupons, or other promotional devices, you must provide "reasonable compensation" to the customer for the proofs of purchase plus any shipping, handling, or other charges the customer paid. (The circumstances of each promotion may affect what is deemed to be reasonable.)
Why You Should Keep Records
Although you are not required to keep records, an accurate, up-to-date recordkeeping system can help show that you are complying with the Rule. Your documentation should provide answers to the following questions.
If you provide delay option notices by telephone, you may want to keep accurate records of the scripts you use. To help document your compliance with the Rule, you may find it useful to maintain a chronological record of all calls you make, including the number from which the call is made, the called number, the party contacted, and the duration of the contact.
Businesses often ask how long they should keep their records relating to Rule compliance The statute of limitations on actions to enforce the Rule is three years for consumer redress and five years for civil penalties. State statutes of limitations for individual customer or state actions are sometimes longer. Check the state laws where you plan to do business.
What the Rule Does Not Cover
The following sales are exempt from the Rule:
The Rule also does not cover services, such as mail order photo-finishing. In the question and answer section that follows, you will notice other circumstances in which mail or telephone order merchandise may not be covered by the Rule.
Why You Should Comply with the Rule
Merchants who violate the Rule can be sued by the FTC for injunctive relief, monetary civil penalties of up to $10,000 per violation (any time during the five years preceding the filing of the complaint), and consumer redress (any time during the three years preceding the filing of the complaint). When the mails are involved, the Postal Service also has authority to take action for problems such as non-delivery. State law enforcement agencies can take action for violating state consumer protection laws.
Apart from this, your failure to ship on time or your failure to notify your customers promptly about delays and to obtain their consent to the delays, or your failure to make full and prompt refunds when your customers do not consent to delayed shipment, can adversely affect your business by discouraging repeat purchases. Accordingly, most businesses regard compliance with the Rule as simply good business practice.