Bought an item on layby and been charged a “service” fee? You’re not alone.

Consumer member Steve Strawbridge started a layby with Bike Barn before Christmas. He later discovered a $30 service fee had been added to the price of his new bike. When he queried the charge, Steve says the store manager told him it was set by head office and the store couldn’t do anything about it.

But our consumer adviser Maggie Edwards says retailers shouldn’t be loading fees on to laybys.

“Retailers were put on notice last year they can’t charge extra service fees or interest for layby sales. The only time they can charge a fee is if the layby is cancelled,” Maggie said.

Steve contacted Bike Barn’s head office armed with Maggie’s advice.

“I told them I wasn’t happy with the fee and with the information Maggie had provided it seemed they may be breaching the Fair Trading Act,” he said.

Bike Barn refunded the $30.

If you’ve been charged a similar fee to set up a layby, you’re entitled to ask for a refund, Maggie said.

Bike Barn told us it no longer charged a layby fee.

Legal points

Layby sales are regulated by the Fair Trading Act. When you set up a layby, the retailer must give you a written agreement clearly describing the goods, the price and your cancellation rights.

You can cancel a layby agreement at any time before taking possession of the goods. But the retailer can only require you to pay a cancellation fee if this is spelt out in the agreement. Any cancellation charge must not be more than the retailer’s “reasonable costs”.

If other fees or interest are charged, the agreement will be considered a credit contract and regulated by the Credit Contracts and Consumer Finance Act.

Retailers who fail to comply with layby sales rules can be fined up to $30,000 by the courts. The Commerce Commission also has the power to issue a $1000 infringement notice to a retailer who fails to provide customers with a layby agreement.