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Laybys are a convenient way for customers to buy our products by paying in instalments over a set period of time. As a seller it is your responsibility to make sure that you are complying with the Fair Trading Act, which covers all new laybys from 17th June 2014.
What Is A Layby?
A layby is when you sell a product to a customer who pays in at least three or more instalments over a set period of time, or in two instalments if your agreement states that it is a layby. They usually pay a deposit and that can be counted as an instalment. When they have paid in full you can give it to them, but until then the product is your responsibility. The total cost of the layby must be no more than $15,000, you can’t charge interest and there must be a written agreement between you and your customer.
What Do I Need In A Layby Agreement?
When the layby is started, you must give your customer a written copy of it. It must be in plain language, easy to read and presented clearly. The front page must have:
The agreement must also state:
It is strongly recommended that you also include:
What Happens During The Layby?
The product which is on layby remains your responsibility, so you need to make sure that it is stored safely and insured. It is good practice to help your customer by providing them a written record of their payments by giving them a receipt or a statement. They are legally able to ask you for a statement of their payments, which you must give them within five working days of them asking for one. The statement must include:
Can The Layby Be Cancelled?
Yes, both you and your customer can cancel the layby. Your customer can cancel the layby at any time before they get the product by giving you either written or verbal confirmation that they want to do so. They do not have to give a reason to cancel it. They can also cancel it if it is during the five day cooling off period if it was an uninvited sale, such as a door to door or telephone marketing sale. They cannot cancel the agreement if they are in possession of the goods or it is after the five day cooling off period for an uninvited sale.
You can only cancel the layby agreement if:
If you cancel the agreement, you need to tell your customer you are cancelling the agreement and give them a written statement if they ask for one. You will also need to immediately refund the customer’s money regardless of who cancelled the agreement, minus any cancellation fees.
Can I Charge A Cancellation Fee?
Yes, you can charge a cancellation fee if all of these things are present:
The amount you can charge must only cover any reasonable costs which have occurred from having the agreement. This includes:
If the amount they have paid up to the cancellation date does not cover the cancellation fee, you are able to recover the rest as a debt, but you cannot charge any interest or other fees.
Disclaimer: The information on this page is general information only and must not be relied on as legal advice. Legal Beagle is not a law firm or a substitute for a law firm. We are unable to provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defences, options, selection of legal documents or strategies.
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