APNewsBreak: Senator warns of layaway's cost

[xchrom]

http://hosted.ap.org/dynamic/stories/U/US_LAYAWAY_CREDIT_WARNING?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-11-13-08-14-36

ALBANY, N.Y. (AP) -- The return of layaway plans this holiday shopping season is raising concern that the break from credit cards might actually cost consumers far more.

For example, a rock `n' roll Elmo doll that requires a $5 layaway fee and a 10 percent down payment for a month can equal a credit card that charged more than 100 percent interest, U.S. Sen. Charles Schumer said.

Schumer is asking major retail associations to direct their members to more clearly present their layaway fees to customers. The Democrat says the ultimate cost of a layaway with a $5 fee can equal 40 percent interest over a month or two for many common purchases compared to the annual rates of most credit cards.

He said if stores don't better present the cost of layaway purchases, he will ask the Federal Trade Commission to determine whether the increasing use of layaway is a deceptive or misleading business practice. Historically, stores started dropping layaway plans in the 1990s in part because of these costs and inconveniences.

[GKirk]

1. I didn't realize...

...that stores charge to use layaway. Is that something new?

[WCGreen]

7. They did back in my day...

But then again, if you missed putting down your money, the item was placed back on the floor for sale and you lost the money you put down.

[valerief]

8. You may have lost the fee but not the payments toward the product. That was refunded. nt

[proud2BlibKansan]

14. Not where I worked.

I worked for KMart for many years before I graduated from college. Layaway payments were not refunded. But then not many people didn't keep up the payments.

[valerief]

16. That's bizarre and sounds illegal.

I haven't used layaway for decades. I guess it was different back then.

[proud2BlibKansan]

25. Customers signed an agreement.

And we were instructed to make sure they understood if they didn't keep up the payments, they would lose their money. They also gave them a year to claim their layaways.

[janet118]

27. sounds like a pawn shop . . .

[proud2BlibKansan]

29. Not really. There was no charge for the layaway.

That's hardly the same as a pawn shop.

[Luminous Animal]

23. They must have changed their policy since I worked there in the mid to late 70s.

I worked in the cash office balancing the books and we definitely refunded the payments.

[proud2BlibKansan]

30. Perhaps it varied according to state laws?

Customers signed an agreement, were given a year to claim their layaways and were not charged for the service. And we honestly had very few who didn't pay it off.

[ScreamingMeemie]

44. I worked for KMart layaway as well, from 86-88... We refunded the payments

and kept the fee. You might have had a shady manager there, because that isn't the way KMart did things and that sounds illegal. The worst part about working for KMart was the Christmas returns. It used to be that you didn't need a receipt... People would come in with the craziest stuff.

[proud2BlibKansan]

59. We didn't charge a fee.

[ScreamingMeemie]

60. It was 1% down. I think the store you were working for was doing something

illegal. I really do.

[proud2BlibKansan]

61. I seriously doubt it.

I worked in 3 different stores. I would imagine state laws vary.

[ScreamingMeemie]

62. I cannot see any state allowing the forfeiture of money paid down

on merchandise not received, or at least allowing for the exchange of merchandise in the amount of which was paid. That smacks of fraud.

[bluestate10]

50. The merchants that my parents did layaway did not refund the payments,

but they did hand over merchandise that the amount paid in had paid for. Merchants did not play tricks, the transaction seemed honest. My parents never failed to pay in full, but we knew families that did and their children got the clothes that were paid for. I think they did loose the holding fee, which to my young mind then, was tiny.

[bluestate10]

36. I came from a dirt poor family. Layaway was the only way my parents could afford to cloth us.

The merchant took clothing off the racks for sale and held it until my parents paid off the cost of the clothing. My parents would take up to four months to pay off the cost of the clothing and bring it home to us. My mother always purchased clothing a size larger to account for our growth during the time that it took to pay for the clothes. There did not seem to be extra charges related to the layaway, the clothes were priced at the same amount that my parents would have paid if they had bought them same day. The difference between then and now is then business people or families owned the clothing stores, those people knew how poor the people that they were selling to were and did not try to rip those people off. Business people then accepted the fact that their inventory would turn over slowly, but they stayed in business, and I assume made profits during that time. Now, everything is a profit center. Store executives want to turn inventory as fast as possible and charge as much as they can get for that inventory. Modern executives care nothing about ripping off people that can't afford to be ripped off. It is all amount profits and big bonuses for modern executives. Why have drinking fountains in stores when bottled water can be sold for a big profit. Charge poor people that have to layaway a charge for the privilege. and while at it, charge them a stiff interest rate until they have paid for the clothing. And take the money that was paid in and sell the clothes if the people laying them away can't pay off the amount in the allotted time. Make no effort to work with the consumer to give them the clothes that they have paid for and take back only the unpaid ones. Then executives, wonder why people hate you as you live well and vote republican.

[NYC_SKP]

2. Better thing to do, America: Quit Buying Crap Shit for Your Kids at Xmas...

You are training them to be consumers and they will be perpetually in search of buying the things that make them happy.

Knock it the hell off.

:patriot:

[marmar]

3. Screams from the "Amen" corner.....

:applause:


Crap shit they'll stop playing with before New Year's Day.

[valerief]

9. Sometimes that crap are coats and hats and shirts and pants and socks and mittens, etc. nt

[NYC_SKP]

11. Which has exactly WHAT to do with using layaway for Xmas gifts?

These items are necessities, but can't be had until Christmas if it's done by layaway.

:shrug:

They can be had when the funds are had, or they can be found second hand.

Whatever the solution, people need to grow up, wise up, know what they're getting into if they "lay away" or if they buy on credit.

But really, my point is the same, quit buying shit at Christmas.

Make gifts.

Buy coats and hats and shirts and pants and socks and mittens as you need them.

:donut:

[valerief]

13. For some people, those ARE the gifts. You must have grown up in a privileged home if you don't know

that.

[NYC_SKP]

19. What? No actually, I wore second hand clothes for the first ten years of my life.

My first bike was a girls frame bike purchased by a family friend at a police auction.

Thank you Uncle Larry (not really an uncle)

He used to come out to the ranch and it just reminded me of how he once came with a couple friends and played music, including the washtub fiddle thing and a little brown jug.

OOH, I was having trouble remembering but it just came to me, the third instrument were the spoons! :P

Over all, my early years were formative, and I would change them for anything.

Anyway, where were we?

People need to get things they need as they need them, Christmas doesn't create real demand.

Period. Christmas giving doesn't excuse self-destructive fiscal behavior.

..........

I'm trying to help people be smart consumers.

Defending people's use of layaway is really supporting merchant's abuse of consumers.

I have to go to the flea market now.

:donut:

[bluestate10]

38. Layaway, when done properly is not abuse of customers. It is actually helpful.

Every piece of clothing that I wore until I was 13 was paid for through layaway. I started paying for my own clothes at 13 and had to use the buy a piece or two and pay for it on the spot because I was too young to lay stuff away.

[ScreamingMeemie]

42. This new layaway isn't covering clothes. In most stores it's toys, electronics

and jewelry.

[bluestate10]

46. Then, that is stupid. People must avoid those layaways. Just don't buy.

The items are not needed to survive or grow.

[tammywammy]

53. I checked Sears and their layaway does cover clothing

Just a FYI.

http://www.sears.com/shc/s/v_10153_12605_Clothing?sbf=Layaway&adCell=W3

Here's their FAQ: http://www.sears.com/sears-layaway/dap-100000000168006#tab4

Kmart has the same FAQ and also includes clothing, since they're the same company.
http://www.kmart.com/shc/s/dap_10151_10104_DAP_Kmart+Layaway?sid=KSx20070515x00001a&psid=42x2933552#tab3

I looked up Walmart, since that's the other place I've heard about bringing layaway back and they are only electronics, toys and jewelry.

Burlington Coat Factory also has layaway: http://www.burlingtoncoatfactory.com/content/aboutus/layaway-policy


So there's a lot of options on layaway for clothing, except at Walmart.

[ScreamingMeemie]

54. I do know that my sister in law was unable to layaway anything other

than toys and electronics at the KMart in SE Michigan. The Burlington here is not doing a layaway but states that you can layaway online. :shrug: It's just not the same layaway.

[bluestate10]

37. I agree. My parents never did layaway for xmas presents.

It was always clothing. My parents would buy our winter jackets during the spring and put the on layaway to have them paid for by the time we started another school year. The difference then was that merchants worked with customers, owned their stores and assumed the risk of someone holding up inventory and not paying for all of it. I look at Schumer's effort with mixed emotion. I can see charging someone 2-3% for taking inventory off sale and saving it for a person to buy. What I can't see is being a predator during the transaction, that aspect seems to be what Schumer is targeting.

[ScreamingMeemie]

40. But sadly... the return of layaway at most stores does not include clothing.

It's for jewelry, electronics and high end things.

[Gormy Cuss]

26. Layaway was sometimes used as a substitute for a savings account.

For some, paying that little bit each week to layaway was easier than trying to keep that money in a jar until there was enough to pay for things. It's similar to the way people allow excess withholding from their checks so that they'll have a big lump sum refund each spring.

No, it's not the best way to manage one's money, but it beats not managing it at all.

[NYC_SKP]

35. Interesting. We used to do trading stamps. Blue Chip and another one, they were green.

Seems like almost all stores gave you stamps with each sale.

One of the few family things we did besides eat was to stick these into books, my grandmother, mother, sister, and myself.

And we would look through the catalogs, drooling, and end up getting utilitarian things we needed, like an iron or something.

Poverty didn't keep us from being happy.

:P

[bluestate10]

39. My mother used green stamps to reduce the cost of purchase.

But her and my father still had to use layaway. As a poster pointed out, poor people used layaway like a savings account. And it was easier and more direct to use layaway then.

[NYC_SKP]

58. That makes sense as long as it didn't cost more than just saving.

I've never used it but understood it to be a way of locking in an item before it goes out of stock, which makes sense.

It would seem that these days people might get dinged a $5/charge, and maybe it's worth it to them.

But I stand by my original position, based mostly on the rock n roll Elmo doll mentioned in the article.

Crap for kids that has the effect of helping them turn into good little empty headed consumers.

:hi:

[csziggy]

56. S&H Green Stamps! We got a lot of stuff with them

We'd save them up for ages and study the catalogs for what to get so we'd get the most for those "hard earned" stamps.

[CreekDog]

64. why are you arguing with this?

some families are poor enough that necessities are the Christmas gifts and sometimes they are shoes or clothes or whatnot that are needed, but are given at Christmas.

how can someone here be so clueless that there are poor people that are doing all kinds of things to both get by and provide for their families with extremely limited means, and sometimes things are new and sometimes they are not new.

:wtf:

[rhett o rick]

21. No the definition of "crap" is CRAP. No one is telling American to stop buying coats.

A lot of Americans buy tons and tons of CRAP. That needs to stop for a number of reasons. Dont you agree?

[lonestarnot]

12. What skippy said!

:applause:

[sarcasmo]

4. Schumer works for the credit card companions. The only reason he would be warning against

using lay away is that the credit companies are pressuring him.

[valerief]

6. Right. Too bad he isn't working for the 99% instead. nt

[valerief]

5. I wish there was a scenario included in Schumer's statement.

The Democrat says the ultimate cost of a layaway with a $5 fee can equal 40 percent interest over a month or two for many common purchases compared to the annual rates of most credit cards.

SCENARIO 1

Let's say someone puts $100 worth of Christmas toys on layaway for three months. There's a $5 fee. So that's a total of $105. They pay $35/month for 3 months.

If they charge that $100:
> per http://www.calculatorweb.com/calculators/creditcardcalc.shtml, $100 at 25% APR at $35/month is $4.18 interest. Total is $104.18, paid off in three months.
In addition,
> the store they're patronizing gets 2% less of the retail price, so they've raised their prices to make up for the shortfall
> the customer may pay an annual fee to the credit card company
> the credit card company may hold the payment so that a late fee can be charged (this is not outrageous; it's common practice)

SCENARIO 2

Let's say someone puts $100 worth of Christmas toys on layaway for four months. There's a $5 fee. So that's a total of $105. They pay $26.25/month for 4 months.

If they charge that $100:
> per http://www.calculatorweb.com/calculators/creditcardcalc.shtml, $100 at 25% APR at $26.25/month is $5.28 interest. Total is $105.28, paid off in FIVE months.
In addition,
> the store they're patronizing gets 2% less of the retail price, so they've raised their prices to make up for the shortfall
> the customer may pay an annual fee to the credit card company
> the credit card company may hold the payment so that a late fee can be charged (this is not outrageous; it's common practice)

SCENARIO 3

Let's say someone puts $200 worth of Christmas toys on layaway for three months. There's a $5 fee. So that's a total of $205. They pay $66.67 month 1, $66.67 month 2, and $66.66. month 3.

If they charge that $200:
> per http://www.calculatorweb.com/calculators/creditcardcalc.shtml, $200 at 25% APR at $66.67/month is $8.74 interest. Total is $208.74 paid off in FOUR months.
In addition,
> the store they're patronizing gets 2% less of the retail price, so they've raised their prices to make up for the shortfall
> the customer may pay an annual fee to the credit card company
> the credit card company may hold the payment so that a late fee can be charged (this is not outrageous; it's common practice)

The biggest advantage to layaway over a credit card is YOU DON'T NEED A CREDIT CARD TO DO LAYAWAY. You don't need to turn over your personal information to a credit card company which sells that info and makes money off it. Or, due to poor security or whatever, lets it get into unscrupulous hands.

[Fumesucker]

10. +1

[bluestate10]

43. Beautiful post. You logic is spot on. You touched on the very reason why layaway helps poor people.

When it is done right. The $5 charge looks like a lot, but if that is the only charge applied, it is nothing. The merchant is likely having to pay 10% annual interest on the laid-away merchandise, there is a cost to the merchant although I admit the merchant comes out ahead on that exchange while moving inventory. But the key issue is that a poor family clothe children and the parents while having paid only $5 more than they would have paid on a same day purchase.

[OhioChick]

15. Isn't Schumer in bed with the financial industry? n/t

[Yavin4]

17. If You Run for a Statewide Office in New York, You Have to be in Bed with the Finance Industry

Or, they will fund your opponent. Just like anyone from Indiana has to be in bed with Big Pharma, or anyone from Louisiana has to be in bed with oil and gas.

That's the problem with our political system. Candidates from certain states have to kiss up to industry interests or they won't get elected.

[Odin2005]

32. Or in North Dakota you have to be in bed with Agribusiness.

It's maddening!

[Yavin4]

33. In Essence, Most of Elected Officials Don't Represent People

They represent their states' primary corporate interests.

[Hippo_Tron]

66. Devil's advocate, their state's primary corporate interest employs a large part of their state

[sarcasmo]

20. I think it's obvious by his anti lay away stance.

[bluestate10]

45. You know. Until that was pointed out, I missed that angle.

I guess I will have to not call other DU members clueless....at least until 30 minutes pass. If Schumer is complaining about the $5 charge, then his attack is baseless. If he is complaining about a $5 charge and a carrying interest rate tacked on, then he has a point. But, if the second scenario is the one, if Schumer looked behind the curtain, he will see the very financial companies he represent pulling the strings.

[SoCalDem]

18. Layaway used to be different ..at least the way stores in my hometown did it

We used to always use layaway for stuff like buying a new swim suit in February or a winter coat in August.

You put down a percentage to "hold" it, and made regular payments until it was paid off. The advantage to to store was that they knew they had made a sale, and that the merchandise was full price...not marked down. They also knew early enough in the season which sizes were depleted, so they might order more before the item was no longer available.

If you failed to pay off the layaway, they could put the merchandise back on the floor and sell it.

My aunt's store did NOT charge any fee for using layaway, not did I ever pay one anywhere else. All the money paid on an item was deducted from the price of the item.

[bluestate10]

47. That is how I remember my parents using layaway. nt

[AllyCat]

22. While some of these programs seem a bit predatory, the outrage from WSJ and Schumer

seem more an effort to protect the credit card companies. I will cry foul on this and am considering layaway for a couple of things at my LOCAL, INDEPENDENT stores this year.

[Frustratedlady]

24. People tend to forget that the store is taking that item off the floor or off their inventory.

So, if someone defaults on their layaway, the store has missed a sale and will probably end up having to put it on sale at a loss.

Also, someone might find it on sale at another store and will forfeit the dollars paid if they are less than the break they got on the sale item. Once again, the item sits.

[valerief]

28. And the credit card company also loses. But that's the point, isn't it? To make sure they don't lose

[Odin2005]

31. Schumer is buddy-buddy with the CC companies, of course he would say that.

Also, Layaway encourages delayed gratification, while using credit cards allow you to take it home before it's fully paid for.

[apocalypsehow]

34. They actually do that still? My mom and aunts loved, loved, loved "layaway." They saw it as an

"healthy" form of borrowing on credit, because you had it paid off before it came into your possession, but at the same time item was reserved for you. Old school.

I honestly didn't know it was still around.

[ScreamingMeemie]

41. It just came back, for the most part, this year...but it is only for toys, electronics

and jewelry at most stores that have brought it back. When I was a kid it covered everything in the store.

[bluestate10]

49. I think Sears started it two or three years back after the former investment fund manager bought

Sears. Sears concept was pretty good, the retailer was mostly interested in moving merchandise. Schumer is right, but twists the logic a bit. $5 for a one month purchase does translate to a hellacious annual interest rate. But the fact is, when a person picks up the merchandise, they pay the sale price plus just $5.

[bluestate10]

48. It vanished for a while, but is making a comeback.

Sears started doing it again a couple years back as an option to the Sears charge card. Now many other retailers are jumping on the bandwagon. I do not know what modern layaway is like. I have not even considered it and don't need to use credit, I am out of the loop somewhat. I initially thought that Schumer's effort was noble, but some DU members have literally slapped up side the head and make me understand that Schumer is most likely up to helping credit card companies, most of which are headquartered in New York.

[SoCalDem]

51. It mostly went away when EZ-Credit arrived for most people in the 80's

With that magical little plastic card, one could take it home and put it in the closet..and pay interest for the privilege of having a new swimsuit in February..or a wool coat in August:)

[Gin]

52. I think it is a good idea to bring it back...$5.00 fee is not much to

get what you want...have it stored...and when paid off, it's paid off.

Schumer is shilling for his benefactors, the CC companies.

[Modern_Matthew]

55. I get a 300-400 dollar profit sharing bonus cause of layaway.

And everyone here is happy about its return.

No complaints here.

[sendero]

57. Layaway..

... is back. Is this a great country or what?

[JI7]

63. people might be more careful with Layaway than Credit Cards because they don't get the Item

until it's paid off. with credit it's easy for people to spend since they get the item right away.

with layaway they will be giving out money without getting something in return .

so people who use the service might be more careful and have thought it out first.

parents who want to be sure they can give a toy to their kid for christmas might find it helpful.

[apocalypsehow]

65. ...

:kick: