Wendy lays down the lay-by law

The system allows someone to choose an item - usually clothing, furniture or a piece of jewellery - and pay it off every month, with no interest added.

The key difference between buying on credit and a lay-by is that the goods remain the property of the store until the client pays in full.

And before the Consumer Protection Act came into effect almost five years ago, the law allowed the consumer to cancel the agreement at any time, and the store had to repay all monies paid, minus 10% as a cancellation penalty. But in practice, many smaller independent stores refused to refund customers at all.

It was a case of you cancel the deal, you forfeit whatever you’ve paid.

About the lay-by

The CPA makes lay-bys an even more appealing for consumers, but less so for the stores, who may now retain only 1% of the purchase price of the goods if the consumer cancels the agreement.

So, say a customer sets aside a R600 jacket and pays R100 a month for four months, and then cancels. The store must refund that R400, minus just R6 as a cancellation penalty.

Sadly, I’m still getting complaints about stores who are completely flouting the lay-by law.

Jameel's lay-by experience 

Jameel Sayid of the Bluff contacted Consumerwatch about his lay-by experience at a store called Side Step in Durban’s West Street.

He came across a pair of shoes in Side Step, West Street, and as he didn’t have the R1300 purchase price, he chose the lay-by option. He paid R800 as his first payment, and was told he could pay the balance over three months. But the terms and conditions were not spelt out on his receipt.

So that’s the first problem. If you do a lay-by deal, make sure it’s properly documented. What you must pay, over what time period, and all the terms and conditions - including what happens if either party changes their minds.

In this case, it was Jameel who changed his mind about those shoes. He went back to the store to try the shoes on again, to make sure he’d set aside the right size. Realising they were a bit tight, he asked if he could change the size, but the salesman said that wasn’t possible.

At that point, Jameel said he wanted to cancel the whole deal. “I was told that can’t happen. I either have to pay the money in full and choose something else, or forfeit the money.”

That’s a clear contravention of the CPA’s section on lay-bys. Jameel was entitled to a refund of his R800, minus just 1% of the selling price of the shoes - R1300, which is just R13.

So I phoned the store, and a man who identified himself as the store manager told me there must have been a misunderstanding, and that Jameel was welcome to go in to the store and get a full refund of his R800.

And he did.

So, justice for Jameel, but no doubt there are many, many others being denied their rights and forced to forfeit their lay-by payments illegally.

So spread the word. If you put money down on lay-by deal, and you change your mind during the lay-by period, you are legally entitled to a refund of everything you paid, except for 1% of the selling price.

I think being able to charge only such a tiny cancellation penalty is a little unfair to the stores, but they get to choose if they offer lay-bys or not. And if they do, they need to stick to the law.