U.S. Senator calling for greater transparency in store layaway plans

In recognition of the fact that many Americans are struggling to make ends meet and still searching for viable debt relief options, retailers across the country have begun offering their customers the option of layaway plans during the holiday season.

In general, a layaway plan allows a consumer to purchase an item without having to pay the entire amount up front. However, the distinguishing feature of a layaway plan is that the consumer cannot simply take the item home from the store. Rather, they must pay for the item in full first. In the meantime, the retailer will keep the item off the shelves and store it for the customer.

There is often a fee associated with layaway plans, which acts as a sort of semi-deposit for the retailer in the event a consumer fails to make the payments. Specifically, if the consumer fails to make all of the payments in the agreed upon time, the item goes back onto the store shelves and the customer’s payments are returned sans the layaway fee.

While layaway plans disappeared back in the 1990s, they have reemerged as a so-called alternative to many consumers who now have little or no access to credit cards.

Interestingly, one U.S. Senator has recently expressed concern over layaway plans, calling for greater transparency by retailers regarding their terms.

Senator Charles Schumer (D-New York) sent letters to both the Retail Industry Leaders Association and the National Retail Federation last Friday asking them to instruct their members to clarify the potential costs of a layaway plan to consumers.

According to Schumer, consumers can end up paying far more under a layaway plan’s interest rates than a traditional credit card.

“These layaway programs are nothing more than hideaways for sky-high interest rates that consumers would never tolerate with a credit card,” said Sen. Schumer. “The holiday season is supposed to be about giving and not taking, but these layaway programs are taking advantage of people and charging them outrageous interest rates, under the guise of making it easier and more affordable to shop.”

Not surprisingly, the retail industry has treated these accusations with some skepticism.

“Layaway is not credit, period,” said Brian Dodge of the Retail Industry Leaders Association. “Layaway programs provide consumers with a responsible, low-cost alternative to credit cards that allow customers to buy an item that they want but the flexibility to pay for it over time without accumulating debt.”

It is worth noting that Senator Schumer indicated that if stores fail to provide consumers with more accurate information about layaway plans, he will likely ask the Federal Trade Commission (FTC) to launch an investigation into whether layaway plans are a deceptive or misleading business practice.

Whatever the cause, whatever the reasons behind your financial difficulties, take the time to speak with an experienced legal or financial professional if you would like to learn more about Chapter 7 bankruptcy, Chapter 13 bankruptcy or additional debt relief options.

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