Frequently Asked Legal Questions | Service Contract Cancellation/Refund Rights?

A:  Yes.  California law provides that you can cancel your service contract for any motor vehicle, home appliance, or home electronic product purchased for use in this state, at any time before it expires, 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 brochure, but may receive the actual service contract afterwards by mail.

       Even if you submitted a claim under the service contract for repairs before the applicable 30 or 60 days expired, then, upon sending written notice, you are still entitled to a pro-rated refund, 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.

       After the applicable 30 or 60 day period, regardless of whether you submitted a claim, you are still entitled to a pro rata refund, 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.  In this case, a cancellation or administrative fee could be imposed, which cannot exceed 10% of the price of the service contract, or $25.00, whichever is less.  This means the fee can at most be $25.00, and even less for service contracts costing less than $250.00.

       The 60 day time period within which to send written notice of cancellation applies, unless the contract provides for a longer period, to a new motor vehicle, and a used motor vehicle sold with a manufacturer's warranty.

       The 30 day time period within which to send written notice of cancellation applies, unless the contract provides for a longer period, to the following products:

• A used motor vehicle without a manufacturer's warranty; OR

• A home appliance; OR

• A home electronic product;

       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.

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*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.

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