Layaway Plans: No Credit, No Problem


With back-to-school sales upon us and the holiday season not far behind, layaway plans arre becoming a popular way to buy things without spending the full amount in cash up front and without using credit.

Layaway purchases involve a deposit (a percentage of the total amount due) and then a series of follow-up payments while the retailer holds the purchased item until it is paid in full. (Unlike when you buy an item on credit and get to take it home that day, even before it is entirely paid for.)

Our parents used layaway plans at brick-and-mortar stores such as Burlington Coat Factory (Stock Quote: BCF), Kmart and Sears (Stock Quote: SHLD).

Now online sites also offer layaway plans, including eLayaway and EZ-Layaway. Online plans can be paid for using a credit or debit card, or by providing information from a bank or checking account. Paying by money order can also be an option. Some sites, such as eLayaway, offer layaway plans for nonretail items like travel, season tickets for sports teams and even medical services. Set up the right plan for you, and you can start paying for your February ski vacation right now.

However, not all layaway plans are created equal. According to a new consumer alert from the Federal Trade Commission, the nation’s consumer protection agency, consumers should be sure to ask about layaway plans, and refund policies, before they begin any layaway plan.

FTC Layaway Tips:

1. Get the merchant’s layaway policy in writing. Look for details on the terms: how much time do you have to pay for the merchandise or service; when are payments due; what is the minimum payment required; and what are the possible charges for using the plan, like a service fee. Find out if there is a penalty for missed or late payments: Will your contract be cancelled? Will the merchandise be returned to inventory?

2. Check the refund policy. If you decide you don’t want the merchandise after you’ve made some or all the payments, can you get a refund? Will the refund be cash or merchant credit? Will there be a service fee?

3. Check out the business. Especially true for online purchases. To find out if complaints have been filed against a retailer or online service: Contact your state Attorney General’s Office, local consumer protection agency or your local Better Business Bureau.

4. Keep good records. Any evidence of payments you make on layaway merchandise may come in handy if you have a problem with the seller.

How You Are Legally Protected.
According to the FTC, layaway plans are not specifically governed by federal law, but unfair or deceptive sales practices are illegal under the FTC Act. To file a complaint, visit or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261.

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