H.F. _____ Section 1. Section 537.3501, Code 2009, is amended to read 1 as follows: 2 537.3501 Door-to-door sales Consumer approval transactions . 3 In a consumer credit sale or a sale in which the goods 4 or services are paid for in whole or in part by a lender 5 credit card or a consumer loan in which the lender is subject 6 to defenses arising from the sale under section 537.3405, 7 a consumer has, in addition to all the rights and remedies 8 provided by chapter 555A 555 , a cause of action under section 9 537.5201, subsection 1, and the administrator has all powers 10 granted under article 6, part 1, to enforce the provisions of 11 chapter 555A 555 . 12 Sec. 2. Section 551A.3, subsection 4, paragraph b, 13 subparagraph (7), Code 2009, is amended to read as follows: 14 (7) The cancellation statement appearing in section 15 555A.3 555.3 . 16 Sec. 3. Section 551A.6, Code 2009, is amended to read as 17 follows: 18 551A.6 Cancellation of contract. 19 The purchaser has the right to cancel a contract with a 20 seller for a business opportunity for any reason at any time 21 within three five business days of the date the purchaser signs 22 the contract or the date the contract is accepted by the seller 23 whichever is later. The notice of the right to cancel, the 24 seller’s obligation to provide the purchaser with cancellation 25 forms, and the procedures to be followed when a contract 26 is canceled shall be the same as the procedures in chapter 27 555A 555 for door-to-door sales consumer approval transactions . 28 Sec. 4. Section 552A.3, Code 2009, is amended to read as 29 follows: 30 552A.3 Right of cancellation —— requirement of writing. 31 The requirements of sections 555A.1 through 555A.5 555.1 32 through 555.6 , relating to door-to-door sales consumer approval 33 transactions , shall apply to sales of buying club memberships, 34 irrespective of the place or manner of sale or the purpose for 35 -1- LSB 6198YC (6) 83 rn/nh 1/ 12

H.F. _____ which they are purchased. In addition to the requirements of 1 chapter 555A 555 , a contract shall not be enforceable against 2 a person acquiring a membership in a buying club unless the 3 contract is in writing and signed by the purchaser. 4 Sec. 5. NEW SECTION . 555.1 Definitions. 5 As used in this chapter, unless the context otherwise 6 requires: 7 1. “Business day” means any calendar day except Saturday, 8 Sunday, or a public holiday, including holidays observed on 9 Mondays. 10 2. a. “Consumer approval transaction” means a transaction 11 for the sale of consumer goods or services which is 12 characterized by all of the following: 13 (1) Initiation by face-to-face solicitation of a customer 14 away from a regular place of business of the seller or by a 15 mail or telephone solicitation from the seller directed to the 16 customer. 17 (2) Consummation of the sale or submission by a customer 18 of an offer to contract or other writing evidencing the 19 transaction away from a regular place of business of the 20 seller. 21 (3) Payment in the form of an extension of credit or through 22 a cash transaction in which the purchase price the customer 23 pays exceeds twenty-five dollars. 24 b. “Consumer approval transaction” does not include any of 25 the following transactions: 26 (1) A transaction made pursuant to prior negotiations 27 in the course of a visit by the buyer to a retail business 28 establishment having a fixed permanent location where the 29 goods are exhibited or the services are offered for sale on a 30 continuing basis. 31 (2) A transaction in which the consumer is accorded the 32 right of recision by the provisions of the federal Consumer 33 Credit Protection Act, 15 U.S.C. § 1635, or rules issued 34 pursuant to this chapter. 35 -2- LSB 6198YC (6) 83 rn/nh 2/ 12

H.F. _____ (3) A transaction pertaining to the sale or lease or 1 listing for sale of real property, to the sale of insurance 2 or a prepaid health service plan, to the sale of securities 3 or commodities by a broker-dealer registered with the federal 4 securities and exchange commission, to a catalog sale that is 5 not accompanied by any other solicitation, or to a consumer 6 loan, as defined in section 537.1301, conducted and consummated 7 entirely by mail. 8 (4) A door-to-door sale in which the buyer has initiated 9 the contact and specifically requested the seller to visit 10 the buyer’s home for the purpose of repairing or performing 11 maintenance upon the buyer’s personal property. If in the 12 course of such a visit, the seller sells the buyer the right 13 to receive additional consumer goods or services other 14 than replacement parts necessarily used in performing the 15 maintenance or in making the repairs, the sale of those 16 additional goods or services do not fall within this exclusion. 17 c. “Consumer approval transaction” , irrespective of the 18 place or manner of sale, also includes either of the following: 19 (1) A sale of funeral services or funeral merchandise 20 regulated under chapter 523A. 21 (2) A sale of a social referral service or an ancillary 22 service. For purposes of this subparagraph, “social referral 23 service” means a service for a fee providing matching or 24 introduction of individuals for the purpose of dating, 25 matrimony, or general social contact not otherwise prohibited 26 by law, and “ancillary service” means goods or services directly 27 or indirectly related to or to be provided in connection with a 28 social referral service. 29 3. “Consumer goods or services” means goods or services 30 purchased, leased, or rented primarily for personal, family, 31 or household purposes, including courses of instruction or 32 training regardless of the purpose for which they are taken. 33 4. “Door-to-door sale” means a consumer approval transaction 34 in which the seller or the seller’s representative personally 35 -3- LSB 6198YC (6) 83 rn/nh 3/ 12

H.F. _____ solicits the sale at the buyer’s residence, including, 1 notwithstanding subsection 2, paragraph “a” , subparagraph (1), 2 those in response to or following an invitation by the buyer. 3 5. “Place of business” means the main or permanent branch 4 office or local address of a seller. 5 6. “Purchase price” means the total price paid or to be paid 6 for the consumer goods or services, including all interest and 7 service charges. 8 7. “Seller” means any person engaged in the sale of consumer 9 goods or services pursuant to a consumer approval transaction. 10 Sec. 6. NEW SECTION . 555.2 Contract. 11 A seller shall furnish the buyer with a fully completed 12 receipt or copy of any contract pertaining to a consumer 13 approval transaction sale at the time of its execution, which 14 shows the date of the transaction and contains the name and 15 address of the seller, and in immediate proximity to the space 16 reserved in the contract for the signature of the buyer or on 17 the front page of the receipt if a contract is not used and in 18 boldface type of a minimum size of ten points, a statement in 19 substantially the following form: 20 You, the buyer, may cancel this transaction at any time 21 prior to midnight of the fifth business day after the date of 22 this transaction. See the attached right to cancel form for an 23 explanation of this right. 24 Sec. 7. NEW SECTION . 555.3 Right to cancel —— customer 25 notification. 26 1. Except as provided in subsection 4, in addition to any 27 other right to revoke an offer, to rescind a transaction, or to 28 exercise any remedy for breach by the seller, a buyer has the 29 right to cancel a consumer approval transaction until midnight 30 on the fifth business day following receipt by the buyer of the 31 notice required pursuant to this section. 32 2. A seller shall furnish to a buyer, at the time the buyer 33 signs a consumer approval transaction contract or otherwise 34 agrees to purchase consumer goods or services from the seller 35 -4- LSB 6198YC (6) 83 rn/nh 4/ 12

H.F. _____ pursuant to a consumer approval transaction, a completed form 1 in duplicate, captioned “Buyer’s Right To Cancel”, which shall 2 contain in ten point boldface type the following information 3 and statements: 4 BUYER’S RIGHT TO CANCEL 5 .............................. 6 (enter date of transaction) 7 You may cancel this transaction, without any penalty or 8 obligation, within five business days from the above date. 9 If you cancel, any property traded in, any payments made by 10 you under the contract or sale, and any negotiable instrument 11 executed by you will be returned within ten business days 12 following receipt by the seller of your cancellation notice, and 13 any security interest arising out of the transaction will be 14 canceled. 15 If you cancel, you must return to the seller, in substantially 16 as good of condition as when received, within twenty business 17 days any goods delivered to you under this contract or sale; or 18 you may if you wish, comply with the instructions of the seller 19 regarding the return shipment of the goods within twenty business 20 days at the seller’s expense and risk. 21 If the seller does not pick them up within twenty days 22 following their return, you may regain possession or dispose of 23 the goods without any further obligation. 24 To cancel this transaction, mail or deliver a signed and 25 dated copy of this cancellation notice or any other written 26 notice, or send a telegram, to ............, (Name of seller) 27 at ................ (Address of seller’s place of business) not 28 later than midnight of ............. (Date). 29 I hereby cancel this transaction. 30 ........................ 31 (Date) 32 ........................ 33 (Buyer’s signature) 34 3. A seller who in the ordinary course of business regularly 35 -5- LSB 6198YC (6) 83 rn/nh 5/ 12

H.F. _____ uses a language other than English in any advertising or other 1 solicitation of customers or in any printed forms for use by 2 customers or in any face-to-face negotiations with customers 3 shall provide the contract and right to cancel form pursuant 4 to this section to a customer whose principal language is such 5 other language both in English and in the other language. 6 4. Notice of cancellation shall be given by regular mail 7 addressed to the seller and shall be considered given at the 8 time of mailing. If the consumer goods or services which are 9 the subject of the transaction must be custom made in the 10 ordinary course of business and are unique to the transaction, 11 the seller may require that a notice of cancellation be made by 12 registered or certified mail. 13 5. A buyer may not cancel a consumer approval transaction if 14 any of the following applies: 15 a. The buyer has determined that a delay of five business 16 days in performance of the seller’s obligation under the 17 transaction will jeopardize the welfare, health, or safety of 18 natural persons or endanger property which the buyer owns or 19 for which the buyer is responsible, and the buyer furnishes the 20 seller a separate dated and signed personal statement modifying 21 or waiving the buyer’s right of cancellation. 22 b. The seller in good faith substantially begins performance 23 of the contract before the buyer gives notice of cancellation. 24 c. If the consumer approval transaction involved the sale 25 of consumer goods which cannot be returned to the seller in 26 substantially as good of condition as when received by the 27 buyer. 28 Sec. 8. NEW SECTION . 555.4 Duties of seller. 29 A seller shall, in connection with a consumer approval 30 transaction, perform or comply with the following: 31 1. Furnish two copies of the right to cancel form to the 32 buyer as provided in section 555.3, and complete both copies by 33 entering the name of the seller, the address of the seller’s 34 place of business, the date of the transaction, and the date, 35 -6- LSB 6198YC (6) 83 rn/nh 6/ 12

H.F. _____ not earlier than the fifth business day following the date 1 of the transaction, by which the buyer may give notice of 2 cancellation. 3 2. Not include in any contract or receipt any confession of 4 judgment or any waiver of any of the rights to which the buyer 5 is entitled under this chapter including specifically the right 6 to cancel the sale in accordance with the provisions of this 7 chapter. 8 3. Inform each buyer orally, at the time the buyer signs the 9 contract or purchases the consumer goods or services, of the 10 buyer’s right to cancel, in the event of a consumer approval 11 transaction conducted as a door-to-door sale, or away from a 12 regular place of business of the seller, or as a telephone 13 solicitation. 14 4. Not misrepresent in any manner the buyer’s right to 15 cancel. 16 5. Honor any valid notice of cancellation by a buyer and, 17 within ten business days after the receipt of notice, refund 18 all payments made under the contract or sale, return any goods 19 or property traded in, in substantially as good of condition 20 as when received by the seller, and cancel and return any 21 negotiable instrument executed by the buyer in connection 22 with the contract or sale and take any action necessary or 23 appropriate to terminate promptly any security interest created 24 in the transaction. 25 6. Not negotiate, transfer, sell, or assign any note or 26 other evidence of indebtedness to a finance company or other 27 third party prior to midnight of the seventh business day 28 following the day the contract was signed or the consumer goods 29 or services were purchased. 30 7. Within ten business days of receipt of the buyer’s notice 31 of cancellation, notify the buyer whether the seller intends to 32 repossess or to abandon any shipped or delivered goods. 33 Sec. 9. NEW SECTION . 555.5 Duties of buyer. 34 A buyer shall, in connection with a consumer approval 35 -7- LSB 6198YC (6) 83 rn/nh 7/ 12

H.F. _____ transaction, perform or comply with the following: 1 1. Return property subject to a canceled consumer approval 2 transaction within a reasonable time period following 3 discharge of the seller’s responsibilities under section 555.4, 4 subsection 5, not to exceed twenty days. 5 2. Take reasonable care of delivered property in the 6 buyer’s possession and subject to a canceled consumer approval 7 transaction from the time of delivery until its return to the 8 seller. 9 3. If a seller does not take possession of the property 10 within twenty days after its return by the buyer, ownership 11 of the property vests in the buyer without obligation on the 12 buyer’s part to pay for it. 13 4. If a seller has performed any services pursuant to a 14 consumer approval transaction prior to its cancellation, the 15 seller shall not be entitled to any compensation for those 16 services. 17 Sec. 10. NEW SECTION . 555.6 Effect on indebtedness. 18 Recision of any contract pursuant to this chapter or the 19 failure to provide a copy of the contract to the buyer as 20 required by this chapter shall void any contract, note, 21 instrument, or other evidence of indebtedness executed 22 or entered into in connection with the contract and shall 23 constitute a complete defense in any action based on the 24 contract, note, instrument or other evidence of indebtedness 25 brought by the seller or the seller’s successors or assigns 26 unless a successor or assignee of the seller after the seventh 27 business day following the day the contract was signed has 28 detrimentally relied upon a representation of the buyer that 29 the contract has not been rescinded. This section shall not 30 affect the rights of holders in due course of checks made by 31 the buyer. 32 Sec. 11. NEW SECTION . 555.7 Penalties. 33 1. A seller who violates a provision of this chapter is 34 guilty of a simple misdemeanor. 35 -8- LSB 6198YC (6) 83 rn/nh 8/ 12

H.F. _____ 2. A violation of this chapter is a violation of section 1 714.16, subsection 2, paragraph “a” . 2 Sec. 12. Section 714H.3, subsection 2, paragraph d, Code 3 Supplement 2009, is amended to read as follows: 4 d. Chapter 555A 555 . 5 Sec. 13. REPEAL. Chapter 555A, Code 2009, is repealed. 6 EXPLANATION 7 This bill repeals provisions currently regulating 8 door-to-door sales practices, and replaces them with an 9 expanded regulatory mechanism governing consumer approval 10 transactions. The primary focus of the bill is to confer on a 11 buyer in a consumer approval transaction a five-business-day 12 right to cancel the transaction. 13 The bill defines a consumer approval transaction to mean a 14 transaction for the sale of consumer goods or services which 15 is initiated by a face-to-face solicitation of a customer away 16 from a regular place of business of the seller or by a mail 17 or telephone solicitation from the seller directed to the 18 customer, finalized away from a regular place of business of 19 the seller, and involving payment in the form of an extension 20 of credit or through a cash transaction in which the purchase 21 price the customer pays exceeds $25. 22 The bill excludes from this definition several types 23 of transactions. A transaction made pursuant to prior 24 negotiations in the course of a visit by the buyer to a retail 25 business establishment having a fixed permanent location, and 26 a transaction in which the consumer is accorded the right 27 of recision by specified federal provisions, are excluded. 28 Also excluded are sales or leases of real property, sales 29 of insurance and prepaid health service plans, sales of 30 securities or commodities by a broker-dealer registered with 31 the securities and exchange commission, catalog sales that are 32 not accompanied by any other solicitation, and a consumer loan 33 as defined in Code section 537.1301 conducted and consummated 34 entirely by mail. The bill also excludes a door-to-door sale 35 -9- LSB 6198YC (6) 83 rn/nh 9/ 12

H.F. _____ in which the buyer has initiated the contact and specifically 1 requested the seller to visit the buyer’s home for the purpose 2 of repairing or performing maintenance upon the buyer’s 3 personal property, but additional solicitations made in the 4 course of such a visit will fall within the definition. The 5 bill expressly includes a sale of regulated funeral services 6 or funeral merchandise or of a social referral service or an 7 ancillary service within the definition, irrespective of the 8 place or manner of sale. 9 The bill requires a seller in a consumer approval 10 transaction to furnish the buyer with a fully completed 11 receipt or copy of any contract pertaining to the transaction 12 which shows the date of the transaction, contains the name 13 and address of the seller, and in boldface type informs the 14 buyer of the buyer’s right to cancel the transaction prior 15 to midnight of the fifth business day after the transaction 16 date. The contract or receipt shall be accompanied by a 17 similarly boldfaced right to cancel form specifying rights, 18 responsibilities, and time frames applicable to a transaction 19 cancellation. The form indicates that the seller must 20 return to the buyer any property traded in, payments made, 21 or negotiable instruments executed within 10 business days 22 following receipt of the cancellation notice, and cancel any 23 security interest arising out of the transaction. The form 24 also indicates that the buyer must return to the seller, in 25 substantially as good of condition as when received, within 20 26 business days any goods delivered under the contract or sale. 27 Provision is also made for a buyer regaining possession of any 28 goods not claimed by the seller within 20 business days. 29 The bill addresses alternate language utilization in 30 providing the right to cancel notification, and states that 31 cancellation shall be given by regular mail addressed to the 32 seller and shall be considered given at the time of mailing, 33 unless more stringent mailing requirements applicable to unique 34 goods or services are specified. 35 -10- LSB 6198YC (6) 83 rn/nh 10/ 12

H.F. _____ The bill provides that cancellation is not an option 1 for a buyer in circumstances where a buyer has determined 2 that a delay of five business days in performance of the 3 seller’s obligation under the transaction will have negative 4 consequences and modifies or waives the buyer’s right to cancel 5 where the seller in good faith substantially begins performance 6 of the contract before the buyer gives notice of cancellation, 7 or where the consumer approval transaction involved the sale of 8 goods which cannot be returned to the seller in substantially 9 as good of condition as when received by the buyer. 10 The bill imposes duties which must be complied with on the 11 part of both the seller and the buyer. A seller is required, 12 among other duties, to furnish two completed copies of the 13 right to cancel form to the buyer, not include specified 14 waivers of rights therein, orally inform the buyer of the 15 buyer’s right to cancel unless the transaction is pursuant 16 to mail, not misrepresent in any manner the buyer’s right to 17 cancel, and honor any valid notice of cancellation within 18 the specified time frames. A buyer is required to return 19 property subject to a canceled consumer approval transaction 20 within a reasonable time period following discharge of the 21 seller’s responsibilities not to exceed 20 days, and to take 22 reasonable care of delivered property in the buyer’s possession 23 and subject to a canceled consumer approval transaction from 24 the time of delivery until its return to the seller. The bill 25 provides that if a seller does not take possession of the 26 returned property within 20 days after its return by the buyer, 27 ownership of the property vests in the buyer without obligation 28 on the buyer’s part to pay for it, and further that if a seller 29 has performed any services pursuant to a transaction prior 30 to its cancellation, the seller shall not be entitled to any 31 compensation for those services. 32 The bill provides that recision of a consumer approval 33 transaction contract, or the failure to provide a copy of 34 the contract to the buyer, shall void any contract, note, 35 -11- LSB 6198YC (6) 83 rn/nh 11/ 12

H.F. _____ instrument, or other evidence of indebtedness executed 1 or entered into in connection with the contract and shall 2 constitute a complete defense in any action based on the 3 contract, note, instrument, or other evidence of indebtedness 4 brought by the seller or the seller’s successors or assigns 5 unless a successor or assignee of the seller after the seventh 6 business day following the day the contract was signed has 7 detrimentally relied upon a representation of the buyer that 8 the contract has not been rescinded. 9 The bill provides that a seller violating the bill’s 10 provisions is guilty of a simple misdemeanor, punishable by 11 confinement for no more than 30 days or a fine of at least $65 12 but not more than $625 or by both. Additionally, a violation 13 of the bill’s provisions constitutes an unlawful practice 14 under Code section 714.16, subsection 2, paragraph “a”, 15 punishable by a civil penalty of up to $40,000 per violation, 16 and an additional civil penalty of up to $5,000 per day for 17 intentional violations of court orders or injunctions. 18 The bill makes conforming changes and modifications to other 19 appropriate Code sections consistent with the repeal of Code 20 chapter 555A and replacement with Code chapter 555. 21 -12- LSB 6198YC (6) 83 rn/nh 12/ 12