Q: Can I cancel my service contract and get a refund?
A: Yes. California law provides that you can cancel your service contract
at any time, and receive a refund.* Depending on when you cancel, you can either get a full refund, or a pro-rated refund.
You are entitled to a FULL refund, without any cancellation fee,
if you send written notice of cancellation within the first 30 to 60 days, depending on the product covered, of your receipt
of the service contract, assuming no claim has been made. With automobiles, often you will receive only a copy
of the application for the service contract, and perhaps a brochere, but will receive the actual service contract afterwards
by mail. Sometimes, you will not receive all of the pages of a multi-part form from the dealer, or anyone else, ever.
After the first 30 to 60 days, or if a claim has been made, then, upon sending
written notice, you are entitled to a pro-rated refund, less a cancellation or administrative fee, based upon either elapsed
time, or another objective standard, such as mileage or the value of services performed, at the seller's option as indicated
in the contract.
The cancellation or administrative fee cannot exceed 10% of the price of the
contract, or $25.00, whichever is less. This means the fee can at most be $25.00, and for service contracts
costing less than $250.00, the fee, if any, must be less.
The 60 day time period within which to send written notice of cancellation
applies, unless the contract provides for a longer period, except for the following products:
- A used motor vehicle without a manufacturer's warranty; OR
- A home appliance; OR
- A home electronic product;
in which case you only have 30 days to send the written notice, unless the contract provides for
a longer period.
The person to whom the written notice of cancellation should be sent must
be specified in the contract.
It is unlawful to sell a service contract in California that does not
disclose all of the above cancellation and refund rights.
*Note: If you financed your purchase of the service contract, the refund check may be made payable to
the purchaser, a person to whom the service contract was assigned, if any, or both the purchaser/assignee and the lender of
record.
