With the holidays fast approaching and a fear of rising credit card debt, many shoppers are deciding to purchase items through layaway plans. Layaway has been around for decades. The plans only recently began gaining popularity with a new generation of consumers as a method of purchasing gifts and non-essential items without tapping into revolving credit while payment in cash is not manageable.
There are two types of layaway plans in today’s marketplace:
* In the traditional layaway plan, the consumer arranges for the merchant or retailer to hold the item, while agreeing to a payment plan. Once the item has been paid for in full, the buyer can take the item home.
* In contemporary layaway plans, the retailer offers the consumer a payment plan through a third-party company. The layaway company collects the payments from the consumer and once all payments are made, the layaway company purchases the item from the store and arranges for shipping to the buyer.
There are also online layaway services. “Online layaway services have the same basic structure, although they may actually operate differently,” said Angie Barnett, president & CEO BBB | Greater Maryland. “Nowadays, you can pay for anything from furniture to vacations to planned surgery with a layaway program.”
In this scenario, a retailer will post items for sale on the Internet. An online layaway firm enables the consumer to set up a payment plan to cover the cost of the purchase. Once the consumer makes the agreed upon payments in full, the layaway company sends the money to the retailer and the retailer ships the purchase directly to consumers.
Get the merchant’s layaway policy in writing. Look for details concerning the:
Terms of the layaway plan
* How much time do you have to pay for the merchandise or service?
* When are your payments due?
* What’s the minimum required payment?
* Are there added charges for using the plan, like a service fee?
* Is there a fee or a penalty for missed or late payments, and, if so, will your contract be cancelled?
* Will the merchandise be returned to inventory?
Can you get a refund if you decide you don’t want the merchandise after you’ve made some or all the payments? Shoppers should take note that retailers’ policies may differ. Some will refund all of your money; others may charge a non-refundable service fee; still others may offer a merchant credit for the amount you already paid.
Keep good records of the payments you make on layaway merchandise. They may come in handy if you have a problem with the seller.
Check out the business. Contact your Maryland Attorney General’s Office Consumer Protection Division and your BBB. They can tell you if consumers have filed complaints against the retailer or online service. Layaway plans are not specifically governed by federal law, but unfair or deceptive sales practices are illegal.