Consumer NZ warns about new 'layby' options

Monday, 17 July 2017

Consumer New Zealand is warning shoppers they need to know their rights when using new payment options marketed as 'layby'.

Two buy now, pay later payment services have launched in New Zealand in the past three months: Laybuy.com and Part Pay. Trade Me's Afterpay will also be available in coming months.

The services offer shoppers the option of receiving goods immediately but paying them off in instalments, interest-free, over a number of weeks.

But Consumer New Zealand chief executive Sue Chetwin said calling the service layby was misleading and it would be taking the issue to the Commerce Commission.

**READ MORE:

* Trade Me launches buy now, pay later technology

* Pay now or pay later? New point-of-sale option allows customers to split payment

* Buy now, pay later options roll out for online shoppers**

'It's not layby as we know it and it doesn't come with the same consumer protections,' Chetwin said.

'The name implies it's layby when it's not. Under The Fair Trading Act, if you change your mind about an item you get your money back. But that's not the case with this new 'layby'.'

Chetwin said new instalment payment services did not fall under layby laws or a consumer credit contract, where someone may enter into a contract to pay off an item interest free.

'They're trying to get around a tricky piece of legislation. The company's terms and conditions state it may also arrange a debt collection agency to collect amounts owed, and this can affect your credit score and in the future could effect applications to rent property or get a loan.

'The Fair Trading Act gives customers the right to cancel the deal at any time. That's not the case with Laybuy,' she said.

But Laybuy.com director Gary Rohloff said there was nothing misleading about the name of his company because 'we do not consider consumers could believe we provide a traditional layby service.

'We are very clear about what our company offers. We see Laybuy as modernising the traditional layby model.

 'The consumer can return the product to the merchant, claim their refund and cancel their payment schedule at any time. We don't even charge a cancellation fee which is something many retailers do under the traditional layby model.'

Under Laybuy's terms and conditions, payments will stop being withdrawn from a shopper's bank account when 'the merchant has refunded the purchase price into [Laybuy's] bank account in cleared and immediately available funds'.

Buyers could apply to cancel payments if they were in financial hardship, Rohloff said, but debt collectors would be sent if payments remained outstanding.

'Anybody from 2degrees to power companies to Q Card will chase outstanding debt, that's not unusual.'

Ministry of Business, Innovation and Employment consumer protection spokesperson said: 'The Fair Trading Act offers protection to consumers of these new online layby services, even if they don't qualify as layby sales.'

The Commerce Commission could not comment on a business it had not investigated, but a spokesman said: 'Laybuy is required to comply with the Fair Trading Act, and the Credit Contracts and Consumer Finance Act.'

It was too early to say whether the commission would investigate the new payment service.

Part Pay chief executive John O'Sullivan said he had taken steps to avoid labelling his own company as layby.

'We specifically don't call ourselves layby, I don't think it's helpful. We are an instalment payment provider and essentially that's where we're at. I know Consumer NZ have raised the issue around layby, we think it's a modern instalment payment provider. 

'Almost every type of traditional finance has some sort of fee or interest component but, provided the instalments are made on time as agreed, there's no cost to the consumer.'