Do you purchase goods on lay-by? These are your rights as a consumer

Your consumer rights in a lay-by transaction are very important to ensure that retailers who offer this way of buying essential goods, such as school uniforms, treat you fairly and keep the goods for you until you have paid it off, or repay you if the goods are not available anymore.

When you buy on lay-by, the supplier agrees to sell you something and let you pay in periodic instalments until it is paid off, and only hands over the goods when the full amount is paid.

This is not the same as the new fintech way of buy-now-pay-later, where you get the goods upfront and pay the amount off in a few instalments.

You have to qualify for the buy-now-pay-later transactions with a good credit record, but low-income consumers usually do not qualify because they do not earn enough and often do not have a good credit record.

Lay-bys are, therefore, still a good option for low-income consumers who are not in a hurry to have the goods they buy.

Lay-by offers various benefits for consumers who cannot afford to pay cash for items such as clothing and furniture, such as no credit checks, no interest or extra costs, an extended period to pay, and a small deposit, while it is also available for people who are not South African citizens.

Your money should also be safe and guaranteed.

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Consumer rights protection

Most people who use lay-by can ill afford to lose the money they pay and, therefore, it is important to know what your rights are and what you can expect from the retailer who offers the lay-by.

Section 62 of the Consumer Protection Act (CPA) protects your rights (and your money) as a consumer when you buy on lay-by.

The shop must look after your money as you pay, as well as the goods you are paying for.

According to Section 62, each amount you pay to the retailer stays your property in terms of Section 65, which states that the supplier cannot treat your money as its own and must look after it with the degree of care, diligence and skills that can reasonably be expected of someone managing someone else’s property or money.

The shop is also responsible for the goods until you have paid the full amount of the purchase price and receive the goods.

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What happens if the goods are not available anymore?

The CPA stipulates that the retailer must give you the choice to accept similar or better goods if it cannot deliver the goods when you have paid the full amount.

If you do not want the replacement goods, the shop must: 

• Refund you with double the amount paid if the reason the goods are not available was within the control of the shop.
• If it was not the shop’s fault that the goods are not available, the shop must repay you the amount you paid so far, as well as interest calculated from the date you made the first payment. ‘Beyond the control of the supplier’ in this section only applies if the shop could not have prevented the problem with availability. 

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What happens if you want to cancel the lay-by?

If you cancel the agreement before you have paid the full amount or fail to complete payment within 60 days after the date that the last payment was due, the shop can charge a penalty fee of no more than 1% of the total purchase price.

The shop must also give you written details of how the penalty fee was calculated, unless you state in writing that this is not necessary. This can also be done electronically.

After deducting the penalty fee, the supplier must refund the rest of the money you paid.

It is also important to note that the shop is not allowed to charge a penalty when your failure to pay is due to death or hospitalisation, or in any other case, unless the shop informed you of the penalty before entering the agreement.

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What to remember when you buy on lay-by

• The shop must tell you when you buy on lay-by that there will be a penalty you must pay if you do not keep up with your payments.
• The instalments you pay stay your property until the amount is paid off and you accept delivery.
• If the shop cannot deliver when you have paid the full amount because it was out of its control the shop must refund you with interest or offer similar/better goods that you can choose to accept.
• If it was the shop’s fault that the goods are not available, the refund must be double the purchase price.
• If you decide to cancel, the shop can charge a penalty fee of 1% of the price, unless the cancellation is due to the death or hospitalisation of the consumer.