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When you sell goods to consumers, you may wish to provide different ways for customers to pay, to accommodate for them and their unique situations. This fact can be true both selling online and in-store. However, when you provide alternative payment methods, you need to be more careful online when you lack face to face communication with your customers. If you do not comply with the law that applies to your online sales to consumers, you could open yourself up to severe legal penalties. Furthermore, if customers find that you frequently offer them poor deals, your reputation could also take a hit. Therefore, this article will provide some background and explain whether you are allowed to conduct online layby sales in New Zealand.

How Does the Law Apply to Selling Goods Online?

Whenever you sell goods to consumers for their personal use, you need to comply with different aspects of consumer law. This regulation protects consumers against bad or manipulative deals and gives them certain rights that you, as the seller, need to observe. 

For instance, it is illegal to mislead or confuse consumers.

Consumer law is made up of different components, but when selling goods online in this context, you need to pay attention to the:

  • Consumer Guarantees Act; and
  • Fair Trading Act.

If you sell goods to consumers while ‘in trade’, these laws will apply to you. This status describes your commercial activity, and you will likely be in trade if you:

  • regularly sell goods or services;
  • make or buy goods to sell them on;
  • are GST registered;
  • have staff; or
  • use a company or other incorporated business structure.

Notably, consumer law also sets specific requirements for you, as the seller in trade, can sell goods via layby sales.

What Are Layby Sales?

A layby sale refers to the process where: 

  • it only applies to goods (that is, not services);
  • a customer purchases your product and pays for it in instalments;
  • you hold the product until they have paid the full price or a specified portion of it; and
  • the product costs less than $15,000.

Any sale that meets these specifications is a layby sale, even if you label it as something else. Customers will usually pay a deposit upfront, such as 10 to 20% of the initial price, but you may agree to something different.

In terms of ownership, the customer does not own the goods until they have made the final payment or paid a specified amount. They do not pay any kind of interest while they are covering the purchase price, and you are responsible for the goods.

It is lawful to sell goods on layby online, as long as you comply with the relevant consumer law requirements.

Note that buy now pay later sales, such as those offered by Afterpay or Laybuy, do not qualify as layby sales. Therefore, the regulations surrounding layby sales do not apply to them.

What You Have to Do as the Seller

When you sell on layby, you must provide the customer with a copy of the layby agreement. It must be in plain language and in writing. Additionally, the front page must detail:

  • a clear description of the goods you are selling;
  • a summary of the customer’s right to cancel;
  • whether a cancellation fee applies and how much it is or how you will calculate it;
  • your contact details;
  • the total payable price; and
  • the date of the agreement.

Consumer Rights in Layby Sales

Furthermore, you also need to observe the specific rights that consumers have in regards to these sales. These include:

  • the ability to request a written statement of the amount owing;
  • receiving goods that meet their relevant consumer guarantees;
  • goods being kept safely until they have paid them off;
  • no increases in the layby goods’ price;
  • not being charged interest; and
  • the right to cancel the sale at any time before their last payment and get a full cash refund.

If a customer requests a written account statement, you must supply it within five working days. It must detail:

  • the purchase price;
  • what the customer has paid so far;
  • the amount they still owe;
  • the date the remaining funds should be paid by; and
  • any cancellation fees. 

Notably, when customers request to cancel the sale, you can charge a reasonable cancellation fee to cover the costs of facilitation in most cases. However, you will need to be able to provide a good reason for this fee amount if asked.

There are some situations where you can cancel the sale as well, such as if the customer breaches an important term of your agreement.

Key Takeaways

Selling goods on layby can accommodate your customers’ payment schedules and open up potential sales for you. However, you must comply with the law when you engage in these kinds of sales, which remains true when selling online. If you would like more information or help with your layby sales, contact LegalVision’s eCommerce lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What are layby sales?

A layby sale is when a customer purchases a product from you, and pays the full price in instalments. Once they have paid in full (or a specific amount that you both agree on), they gain ownership of the product.

What is the difference between layby and BNPL?

While both layby sales and buy now pay later (BNPL) sales involve paying in instalments, they differ in when the customer receives the product. For layby sales, customers do not receive the product until they have paid the agreed-upon price. For BNPL sales, on the other hand, customers receive the product once they make the order and continue to pay off their debt afterwards. The law has explicit protections for layby sales, but not for BNPL ones.

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