The pros and cons of lay-by

Lay-by can be a cheap and convenient way to budget but you should be aware of the pitfalls.
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03.Your rights with lay-by

You have a number of rights with lay-by:

  • A purchase qualifies as a lay-by when two or more payments are made, including the deposit, and you don’t receive the goods until they’re paid off. 
  • The shop must give you a lay-by agreement setting out terms and conditions. If you cancel it, the trader can charge you a termination fee, but it can’t be higher than the shop’s reasonable costs. 
  • NSW Fair Trading received 54 complaints about lay-bys between 1 July 2011 and 15 August 2012, and the majority related to problems with cancellations and refunds. One consumer complained of being hit with a $1380 cancellation charge – the 20% deposit for a $6900 ring with no customisation work done on the ring. After NSW Fair Trading intervened, the jeweller relented and gave a full refund. 
  • A number of other complaints related to non-supply of goods. Queensland Fair Trading reports an incident regarding a lay-by for a $400 stereo; once it was paid off the consumer went to the store but was told the stereo had been lost. Instead, he was offered a different stereo with fewer features. The store had the originally ordered stereo on the shelf but said it would now cost $500 and could not be discounted. This store was acting illegally and the consumer was entitled to the stereo for $400. 
  • A store can’t terminate a lay-by agreement unless you breach it – by missing a payment, for example – or they lose the goods through circumstances out of their control, such as a fire. 
  • Shops operating as franchises may have different lay-by conditions from store to store. Company-run BBQs Galore stores, for example, offer a lay-by with no service or cancellation fee. However, when we called one of their franchise stores, we were told the deposit would only be fully refundable if the lay-by was cancelled within the first seven days.

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