Direct Sellers Regulatory Amendments. Consultation Document

Transcription

1 Direct Sellers Regulatory Amendments Consultation Document Service Nova Scotia November, 2014

2 Table of Contents About this Consultation...3 Background...3 Key Changes 3 Direct Selling Definition...4 Application of the Act Financial Security. 12 Continuing-Services Contracts Conclusion

3 About this Consultation In the Spring of 2014, the Nova Scotia House of Assembly passed amendments to the Direct Sellers Regulation Act (DSRA). The DSRA s new penalty provisions came into effect on July 1, In order to implement the other amendments, changes must be made to the province s Direct Sellers Regulations. Service Nova Scotia is seeking input from persons and businesses that may be affected by the proposed changes. Please take some time to consider the questions within this document, and provide your answers by to promotions@gov.ns.ca, by fax at , or by using the space provides in this consultation document and to reply by mail to: Adam Grant, Service Nova Scotia, PO Box 1003, Halifax, NS, B3J 2X1. Please provide all feedback by November 24, We assure you that while not all feedback will be reflected in the final amendments made, it all receives serious consideration. Background: Direct Sellers Regulation Act The Direct Sellers Regulation Act (DSRA) was first enacted in It regulates sales of goods and services to consumers that occur outside of retail stores. It also regulates multi-level marketing relationships, sales from temporary locations like hotels, and the sale of hearing aids in all circumstances. The DSRA sets out a permit and bond requirement for sellers, and provides consumers with cancellation rights and other protections when they enter into direct sales contracts. Current DSRA - Direct Sellers Regulations - DSRA 2014 amendments - Key Changes The 2014 amendments updated and clarified the definition of direct selling. The DSRA will now apply to most situations where a contract is signed in a person s home. The new changes will remove some exemptions from the DSRA, and place more exemptions in the regulations. The focus of the changes is on limiting risks to consumers, rather than on specific business models. To modernize and streamline regulatory processes, salesperson permits are being eliminated for all direct sellers except those who sell hearing aids or hearing aid services. As a result, the bonding requirements for direct sellers will change. Continuing-services contracts sold through direct sales will now be subject to the DSRA. These contracts are for services that are provided by a seller on an ongoing basis, and include any goods sold with the services. Continuing-services contracts will be limited to three years, and may be cancelled by the consumer at any time. Sellers may be entitled to compensation for services that have already been provided. A new notice for these contracts and a new compensation formula must be added to the regulations. 3

4 Definition: Direct selling The 2014 amendments update the definition of direct selling in Section 2 of the DSRA. Going forward, selling, offering for sale, or soliciting orders for the future delivery of goods or services will be considered direct selling in the following situations: When there is no prior request from a prospective purchaser and contact is made by or on behalf of the seller in person at a dwelling; This includes typical direct sale situations where a seller first contacts a consumer at home. When there is no prior request from a prospective purchaser and contact is made by or on behalf of the seller in person, by telephone, or by other personal communication, and any resulting sale is negotiated or entered into at a place other than in person at the seller's usual place of business in the province; This includes solicitation where the consumer did not request the contact and the sale happens outside of a seller s place of business in Nova Scotia. When there is a request made by a consumer, if the request was itself solicited by or on behalf of the seller and any resulting sale is negotiated or entered into at a place other than in person at the seller's usual place of business in the province. This does not include the listing of a seller in a telephone, professional or trade directory; or on a website; This applies to active solicitations, such contest entries where the consumer is contacted afterwards, or when a special offer is delivered to a person s home. When a seller does not operate a retail outlet in the Province, and solicits, advertises or otherwise requests prospective purchasers to present themselves at a dwelling, hotel, motel or temporary or short term establishment where the seller sells or offers for sale or solicits orders for future delivery of goods or services; When they are by a multi-level marketing wholesaler or distributor; When the goods or services are hearing aids or hearing aid services. The requirements for temporary establishments, multi-level marketing, and hearing aid sellers have not changed significantly from the current DSRA. 4

5 Application of the Act Issue Exempt Sales 1. Currently, clause 6(1)(a) of the DSRA exempts direct sales contracts the subject of which is goods or services, the sale of which is regulated by a federal or provincial statute. This exemption was repealed by the 2014 amendments. The exemptions for business-to-business sales, sales by charitable organizations, sales of newspapers, and sales of food and drink remain in place. Service Nova Scotia is proposing to amend the Direct Sellers Regulations to provide that the DSRA does not apply to the following: A person carrying on the business he or she is authorized to perform under the Cemetery and Funeral Services Act, Insurance Act, Legal Professions Act, Mortgage Brokers and Lenders Act, Motor Vehicle Act, Real Estate Trading Act, or Securities Act. Sales of goods or services by a bank, trust company, or credit union, except in cases of lending products used to finance the direct sale of goods or services; Sales of natural produce directly from the producer; or sales of services related to the raising and care of livestock, growing or harvesting natural produce, or domestic work. Sales of personal motor vehicles by persons not normally engaged in the sale of motor vehicles. Sales of goods at a temporary location if the temporary location is identified as being part of a retail outlet that operates in the Province. If you are a current or prospective direct seller, does your business fit within these exemptions? If your business is not on the list, do you believe it should be exempted? Please indicate below. If applicable, please identify any bodies that regulate the business or sector. If you are not a current or prospective direct seller, please comment on any businesses, professions or sectors you feel should be exempted from the DSRA. 5

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7 Issue Direct sales by Nova Scotia retailers 2. Currently, Section 2 and clause 6(1)(h) of the DSRA exempts direct sale contracts from the Act when they are made by a merchant who does more than 50% of their sales in a retail store in Nova Scotia. This exemption was repealed by the 2014 amendments. Should an exemption for retailers continue? Please indicate below, including any suggested models for a retailer exemption. If you are a current or prospective direct seller, does your business fit within this exemption? If you answered yes, please detail the nature of the goods or services you sell, and the approximate percentage of your sales that take place through direct selling. 7

8 Issue Proposed Permit exemption 3. Service Nova Scotia is proposing to exempt telemarketers from the permit requirement when they are offering goods or one-time services and there is no other contact with a consumer. The consumer s cooling-off cancellation rights would continue to apply. Please indicate any concerns with this change, or any other sectors that you believe should be exempt only from the permit requirement. 8

9 Issue Proposed permit exemption 4. Currently, direct seller and salesperson permits are valid for one year dating from the permit holder s application date. With the elimination of salesperson permits, Service Nova Scotia is considering moving to a calendar expiry date (e.g., October 31 st ) for direct seller permits. Please indicate any concerns with this change, and any preference for the expiry date. 9

10 Issue Proposed hearing aid permit advertising exemption 5. Direct sellers are not allowed to advertise that they hold a permit. In view of the educational and testing requirements for hearing aid salespersons, Service Nova Scotia is proposing to lift this restriction for hearing aid direct sellers who sell from retail outlets. Please indicate any concerns with this change. 10

11 Issue Place of Business Requirement 6. Section 6 of the Direct Sellers Regulations requires permit holders to have a permanent place of business in Nova Scotia. This allows consumers to contact the seller and return goods within the province. Service Nova Scotia is considering removing this requirement if direct sellers (not including hearing aid direct sellers) offer another method for consumers to return goods at no cost. Direct sellers must continue to provide consumers with a way to serve notice in Nova Scotia. Would you prefer: Keeping the requirement for a permanent place of business in Nova Scotia; or Allowing direct sellers to satisfy the requirement by either: having a permanent place of business in Nova Scotia; or by providing consumers with the ability to return goods at no cost to the consumer if notice is given during the cancellation period (e.g., free returns by pre-paid parcel pickup). This option will require direct sellers to provide return information during the permit application and renewal process. The return address and information will be added to the direct seller s permit. Please indicate any concerns with either option, or any alternative options. 11

12 Financial Security Issue Bond Calculation Nova Scotia Direct Sellers Regulatory Amendments Consultation Document 7. The current formula for calculating a direct seller bond is based on the average sale amount, the average number of sales per salesperson, and the number of actual or anticipated salespersons working for a direct seller. The minimum bond amount is $2500, and the maximum is $250,000. With the elimination of the salesperson permit, this formula is no longer effective. Service Nova Scotia is proposing the following: i) Where a direct seller is a sole proprietor (no salespersons), the bond amount will be $5000 if the direct seller does not offer any single item over $100; and $10,000 if any item costs more than $100; ii) Where a direct seller has salespersons, the bond amount will be $10,000 if the direct seller does not offer any single item over $100; and $20,000 if any item costs more than $100; iii) Higher value direct selling will have a minimum bond amount of $25,000. These will include continuing-sales contracts (e.g., alarm monitoring), home renovations contracts, and the actual direct selling of hearing aids. iv) Bond amounts may be increased, or new classes of sellers requiring higher bond amounts may be identified in the future. In your view, are these changes desirable, and are there any industries or groups for which these amounts would be inappropriate? Please explain below. 12

13 Issue Bond requirement for Hearing Aid Sellers 8. The Direct Sellers Regulations currently use the same bond formula for all permit holders. Service Nova Scotia is proposing to establish a $10,000 bond requirement for hearing aid sellers who only operate retail outlets and do not actually engage in the direct selling of hearing aids. For those who do engage in the direct sale of hearing aids, the bond amount will be $25,000. In your view, would this be a desirable change, and would this provide sufficient protection for consumers? 13

14 Issue Types of Bond 9. Service Nova Scotia is proposing to accept the following forms of collateral to secure a bond for the direct seller company permit: i) a surety bond or letter of credit in the name of the permit holder; ii) a surety bond or letter of credit in the name of a guarantor for the permit holder; or iii) a cash deposit to be held at 0% interest by the Minister of Finance. Please provide any comments on this change. If applicable, which form of security would you mostly likely use? 14

15 Continuing-Services Contracts Issue Statement of Cancellation Rights for continuing-services contracts 10. The 2014 amendments allow continuing-services to be cancelled by the consumer at any time. These changes require the addition of a new statement of cancellation rights. The following is proposed: Statement of Cancellation Rights Continuing-Services Contracts YOU MAY CANCEL THIS CONTRACT AT ANY TIME. YOU DO NOT NEED A REASON TO CANCEL. You must be notified by the seller in writing at least 30 days before this contract ends. If you do not respond, the seller may automatically extend this contract each month at the current price until you choose to renew or cancel. Once the contract is cancelled, the seller has 15 days to refund any money that you are owed. To cancel, you must give notice of cancellation to the address below or in the contract. You must give notice of cancellation by a method that will allow you to prove that you gave notice, including fax, mail, or personal delivery. Please indicate any concerns with this statement, or other information that should be considered. 15

16 Issue Mandatory contract clauses 11. The 2014 amendments restrict continuing-services contracts to three years and require direct sellers to notify purchasers in writing when a contract is about to expire. Service Nova Scotia is proposing to add or clarify the following mandatory disclosures to the front of a continuing-services direct sales contract: The monthly cost, including all fees, charges, penalties, interest and other amounts or consideration in a one-month period, regardless of the consumer s usage of the services; The fair value of any goods that are supplied under the contract, if applicable; Any one-time or irregular fees payable under the contract; A statement that the contract is for no longer than 36 months; A statement that the purchaser will be notified of the contract s expiry in writing days before the end of the contract; A statement that if the contract is not terminated by the seller or the purchaser, it may continue on a month-to-month basis at the end of the term, at the same monthly rate. Please indicate any concerns with this statement, or other information that should be considered. 16

17 Issues Cancellation Fees 12. The following compensation for sellers is proposed upon the cancellation of a continuing-services contract by consumers after the 10 day cooling off period: Where goods are sold as part of the service contract, the seller may retain an amount equal to the amount stated in the contract for the value of the goods, prorated by the time remaining in the contract term; Where no goods were sold with the service contract, the seller may charge the lesser of $50, or 10% of the value of the remaining monthly payments (10% X monthly payment X months remaining); Please indicate any concerns with this formula, or other information that should be considered. 17

18 Conclusion Nova Scotia Direct Sellers Regulatory Amendments Consultation Document Thank you for your participation. If you have any further comments, please feel free to include them here. 18