While LayBys have been around for decades in retail, the rules are not what they used to be. This came home recently to a retailer I know who was left with a $550.00 value item that a customer had been paying off over two months but then changed their mind. This issue for the retailer is that the item was of launch interest for that licence. They will struggle to get half the retail price now.
Click here to access the ACCC advice on LayBys. See this advice on termination fees:
You can only charge the customer with a lay-by termination fee if they cancel the agreement.
There is no set amount or percentage for a termination fee, but it must not be more than your ‘reasonable costs’ relating to the lay-by agreement (for example, storage and administrative costs that apply to the lay-by agreement). What is ‘reasonable’ will depend on the circumstances and you should be prepared to justify that your costs are reasonable.
If the customer’s lay-by instalments do not cover the termination fee, you are entitled to recover the outstanding amount as a debt. This should be clearly stated in the lay-by agreement along with any other details of termination fees so that your obligation to have a transparent lay-by agreement is fulfilled.
Apart from the termination charge, you are not entitled to damages or any other remedy for the termination of the lay-by agreement.
And this on a LayBy agreement:
An agreement is considered to be a lay-by if the consumer:
- pays for the goods in at least two instalments (when the agreement is called a lay-by), or
- pays for the goods in at least three instalments (when the agreement is not specifically called a lay-by), and
- does not receive the goods until the full price has been paid.
Any deposit paid by the consumer is an instalment.
You may have obligations under the laws about lay-by agreements even if you do not call the agreement a ‘lay-by’.
If you offer LayBys, check your agreement, ensure it is referred to on your LayBy receipts and ensure that you follow the ACCC guidelines. Alternatively, go with another approach that is less risky for your business than LayBy.