Different payment methods
There are a number of different ways people can pay for goods and services. What law applies depends on what payment scheme you’re using:
- Layby – when you pay a deposit on an item, and the shop puts it aside for you while you pay it off.
- Buy Now, Pay Later – when you buy an item, get to own it straight away, and pay set installments over time. No interest is charged.
- Credit contracts – when you buy something, and you don’t have to pay immediately, but you’ll get to take it home or have it delivered straight away. You can delay payment by either agreeing to pay interest (in other words, pay more than the original price at a later date) or provide a security interest over the item (this means the seller could repossess it from you if you don’t pay the debt in full). This includes when you use a credit card or when you buy goods and services on a hire purchase agreement.
If you’re having an issue with the seller that you can’t resolve, you can take them to the Disputes Tribunal (see: “The Disputes Tribunal”).
What laws apply to these different payment methods?
If you’re buying something for personal use, you’ll have protections under:
- the Consumer Guarantees Act, whether or not you buy under a layby, Buy Now Pay Later scheme, or a credit contract. This means you still can return faulty goods and get a refund of your payments to date, or you could ask for a replacement or repair (see: “Automatic guarantees when buying from businesses”), and
- the Credit Contracts and Consumer Finance Act 2003, if you’re buying under a credit contract. This Act sets out certain rules and obligations for lenders (see: “Credit and Debt”).
The Government has recently announced that it will be amending the CCCFA so that it also applies to Buy Now Pay Later schemes.
For more information about the CCCFA, see: “Credit and Debt”.
If you buy on layby, you get specific protections under the Fair Trading Act, including the right to cancel the sale at any time before you take the goods home.
What is a layby sale?
In a layby sale, you pay a deposit on an item and the shop puts it aside while you pay off what you owe within a certain time. The shop keeps the goods and still owns them until you pay off the full price (or an agreed part of it). You don’t pay any interest while you’re paying off the item, but you don’t get to take possession of it until you’ve paid it off.
The specific protections for layby sales only apply if:
- the sale agreement states or implies that you don’t get to take the goods away (“take possession”) until you’ve paid the full price (or an agreed amount towards the full price), and
- the agreement states that it’s a layby sale, and you’ll pay the price in at least two instalments (if you pay a deposit, this counts as an instalment), or
- the agreement doesn’t explicitly state that it’s a layby sale, but it states that you’ll pay the price in at least three instalments (if you pay a deposit, this counts as an instalment), and
- the price of the goods is not more than $15,000.
If the agreement has all three of those features, it is a “layby sale,” whether or not it describes itself as one.
If the above applies, but you also have to pay interest, or fees other than a cancellation fee, then this might also be a credit contract (see: “Credit contracts”).
Who owns the goods while I’m paying them off?
While you’re paying off the goods, the seller still owns them and they remain at the seller’s risk. This means that if the goods are destroyed, for example, in a fire, the seller has to bear the loss, not you. In that case, they’d be required to provide you with a matching item or to refund you all the money you’ve paid.
What information should I get in a layby sale agreement?
The seller has a legal obligation to give you certain information. If they don’t, the Commerce Commission can fine them up to $2,000. The seller must make sure:
- You’re given a copy of the layby sale agreement in writing. The wording should be clear, easy to read, and in plain language.
- The agreement states the total price you’ll have to pay.
- The agreement is dated.
- On the front page, the agreement includes:
- a clear description of the item you’re buying,
- a summary of your right to cancel the sale (see: “Can I change my mind and cancel a layby sale?”)
- whether you’ll have to pay a cancellation charge if you do cancel, and how much this will be or how it will be calculated, and
- the shop’s name, street address, phone number and email address.
If the contract is a credit contract, the seller has to provide additional information (see: “The information you must be given”).
Finding out how much you’ve paid or have left to pay
At any time, you can find out how much you’ve paid and have left to be paid if you bought something through a layby sale.
You can ask the seller for a written statement that clearly sets out:
- the total purchase price
- the amount you’ve paid, as at the date of the statement
- the amount you have left to pay, and when and how you must pay it
- the amount of any cancellation charge you must pay.
The seller must provide the statement within five working days. They can’t charge you for providing it.
You can ask the seller for these details at any time – at the time you enter into the agreement, or while you’re paying off the item, or after you’ve cancelled the agreement. For example, you might want to see the statement if you’re considering cancelling the layby and want to know how much you’ve paid, how much you owe, and how much the seller would want to charge you for cancelling (see below).
If the seller doesn’t provide you with the statement as they’re required to, the Commerce Commission can fine them.
Can I change my mind and cancel a layby sale?
Yes – you can cancel a layby at any time before you take possession of the goods.
- Contact the seller using the contact details given on your agreement.
- Let them know you want to cancel the contract. There’s no particular process or words you have to use, and you can tell them verbally or in writing. You don’t have to give them a reason why you want to cancel.
- When you cancel, the seller should refund you all the money you’ve paid. The seller must give it to you in cash, not a store credit.
- Check your agreement – if it says you have to pay a cancellation fee, this will be deducted from your refund.
- If the cancellation fee is more than you’ve already paid, you won’t get anything refunded and you’ll have to pay the difference.
How much can I be charged for cancelling?
The amount of a cancellation charge can’t be more than the seller’s reasonable costs arising directly from the layby arrangement. Their reasonable costs will include, for example:
- the loss in value of the goods since the date of the agreement (for example, if you put summer clothes on layby, and it’s now winter and so the clothes will be harder to sell)
- reasonable costs of storing and insuring the goods, and
- reasonable administration costs, such as offices expenses, salaries and wages.
Can the seller cancel the layby sale?
If you don’t keep to the terms of the agreement (for example, if you miss payments), the seller can cancel it. In this case they have to refund you what you’ve paid, but can deduct a cancellation fee (if your agreement allows for one).
Other than that, the seller can only cancel the layby agreement if:
- for reasons outside the seller’s control, the goods are no longer available and they can’t reasonably find a satisfactory substitute, or
- the seller has stopped trading – but not if they’ve gone into bankruptcy, liquidation or receivership (see below).
If the seller cancels, they have to refund you what you’ve already paid, and they can’t charge you a cancellation fee (unless you haven’t kept to the terms of the agreement).
What if the seller goes out of business?
If the seller is declared bankrupt or is put into liquidation or receivership, and they still have the goods, you have the right to get the goods if you can pay what you owe within a reasonable time (called “completing the sale”). However, you don’t have the right to complete the sale if you’ve breached the agreement by not making any payments in the last three months.
If there are multiple buyers with layby agreements, and there aren’t enough goods for all of them to complete the sale, the buyers who contracted with the seller first will get the goods. Buyers who miss out will have a chance of getting a refund of what they have paid.