FTC Advice on Layaway

The Federal Trade Commission on Oct. 28 updated its advice to retailers who use layaway. (It is also of interest to consumers.) The highlights of the booklet, which can be found in its entirety online at the FTC site, include:

No federal law governs layaway transac¬tions, but the Federal Trade Commission Act and the Truth in Lending Act could affect company’s layaway plans, as could state or local laws.
The FTC forbids “unfair or decep¬tive acts or practices in or affecting commerce.” So, retailers must disclose important terms of layaway plans or risk violating the act.

A layaway plan may be covered by the Truth in Lending Act if the customers are required to agree in writing “to make all payments until an item is paid in full.”

There are state laws governing layaway in: California, Idaho, Illinois, Massachusetts, Maryland, New York, Ohio, Rhode Island, the District of Columbia and New York City.

Retailers are advised to disclose layaway terms in writing so customers understand their payment obligations and to help prevent misunderstandings and disputes. It’s especially important to disclose: cancellation and refund policies; payment plans; service or layaway charges; and the location, availability, and identification of layaway merchandise. Customers should also be informed about cancellation and refund policies. All of the disclosures should be very clear and specific, and it’s best to include a schedule of the required payment amounts and due dates. The items placed on layaway should be described specifically, including size and color.

Customers “may expect that the item will actually be ‘laid away”—physically separated from stock available for sale.” If retailers do not do this, the FTC advises posting a “sold” sign on items on the sales floor that have been placed on layaway.

The FTC recommends this Layaway Checklist when making up a receipt:
1. A description of the merchandise to be purchased.
2. The total price of the purchase, including any service, layaway, or other charge.
3. The minimum amount of each payment.
4. Dates when payments are due.
5. The date when the final payment must be made.
6. Your cancellation and refund policy.
7. Information about how refund or credit amounts are determined.
8. Notice to the customer about whether the selected item will be separated from other merchandise.
9. The time when the item will be ordered, if it is not already in stock.

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