Internet Sellers Take Note: The Mail Order Rule Isn’t Just for Mail

laptopAre you familiar with the “Mail Order Rule?” The rule, put out by the Federal Trade Commission (or FTC) way back in 1975, basically prohibits mail-order sellers from soliciting orders unless they reasonably expect that they can ship the merchandise within the time stated in the solicitation or, if no time is stated, within 30 days.

But wait, there’s more!

The rule also requires a seller to seek the buyer’s consent to a delayed shipment when the seller learns that it cannot ship within the time stated or, if no time was stated, within 30 days. If the buyer doesn’t consent to delayed shipment, the seller must promptly refund all money paid for the unshipped merchandise. There are specific requirements in the rule as to how the refunds must be made and when.

But wait, there’s more!

The FTC recently updated the Mail Order Rule with some important changes. The Mail Order Rule is now the “Mail, Internet, or Telephone Order Merchandise Rule,” because really, who orders anything by mail anymore? And never let it be said that the government is slow to recognize or adapt to change, like, for example, the internet.

The FTC made 4 key changes to the rule:

  • First, the FTC changed the name of the rule to clarify that the Rule also applies to orders over the Internet, including merchandise ordered using shopping apps, in addition to orders by phone or mail. The Rule also covers merchandise orders placed over the Internet even when the buyer is in the seller’s store at the time of placing the order. For example, if you go into a clothing store, and find a shirt you like, and then use your smartphone to place the order because you can’t find a salesperson anywhere within 100 miles, that order is covered.
  • Second, the new and improved rule gives sellers the flexibility to use methods other than first class mail to deliver refunds and refund notices, as long as those methods are at least as fast and reliable as first class mail. These other methods may include e-mail (for notices), and electronic transfers and private couriers (i.e. Fed Ex).
  • Third, the old rule described sellers’ refund obligations when buyers paid by certain enumerated methods, such as cash, check, money order, or credit. It did not provide similar obligations when buyers paid with any other method not listed in the rule, such as debit cards, payroll cards or gift cards. The new rule clarifies sellers’ obligations for orders using those non-enumerated payment methods: (1) sellers can provide refunds in the form of cash, check or money order, or (2) sellers can provide refunds using the same method that the buyer used. When a buyer uses a non-enumerated payment method, sellers must provide refunds within 7 working days after a buyer’s right to a refund vests.
  • Fourth, the amendments address the timing of refunds for third-party credit transactions (for example, Visa or MasterCard), which sellers often can’t distinguish from non-enumerated methods like debit cards, payroll cards, and gift cards. The old rule allowed sellers one billing cycle in which to provide a refund for third-party credit transactions. Under the new rule, sellers must provide refunds within the same 7 working day period that would apply to non-enumerated payment methods. However, if the seller is also the creditor (such as merchants using their own store charge cards), the refund deadline is still one billing cycle.

The new rule will take effect December 8, 2014, so this is a good time for anyone selling merchandise by phone, mail, or e-commerce to review their policies on delayed shipments and refunds.

Follow me on Twitter @PaulHSpitz