Buyers beware - that's the warning from Consumer NZ over a new interest-free payment scheme that's emerged in New Zealand after success overseas with similar companies. Glassons, Hallensteins, Red Rat and Storm are the first retailers to sign up with Laybuy, giving the company commission for each item that's sold through the system. But how does it work for customers?
Consumer New Zealand is concerned about a new online layby system that's hit New Zealand and is calling for the Commerce Commission to investigate the business model.
Laybuy has been running in New Zealand for about a month, with a number of chain stores adding the option to their websites giving customers the option to pay a purchase off over six weeks, but receive the item after the first payment.
"We've signed up over 7,000 consumers.. and transacted somewhere around $425,000-plus in transactions for the retailers that are on board with us right now so we're delighted and our retailers are delighted too," Laybuy founder Gary Rohloff said.
Consumer's chief executive Sue Chetwin said the company's name is misleading for shoppers, and says the company's terms and conditions are "very confusing and not particularly consumer-friendly."
Consumer thinks there may be a breach of the contract terms of the Fair Trading Act, she said.
"We're concerned that it's called Laybuy when it's not a layby."
"Traditional laybys are where you like something and you pay it off over time and then you pick it up at the end of it and you've also got a cooling off period. Laybys are actually covered by the Fair Trading Act and they are a very special kind of purchase," she said.
The Commerce Commission has not received any complaints about Laybuy and would only have reason to investigate if it became concerned the company was misleading customers or breaching its obligations under credit laws, a spokesperson for the regulatory agency said.
Ms Chetwin said if there's a issue with a purchase or customers are wanting to return it, she believes it will take a long time for the matter to be resolved.
"You first of all have to talk to the merchant, you have to send the item back to the Laybuy site, you have to wait for the merchant to give the refunded money to the Laybuy site and then they refund you. There are no time limits in the terms and conditions on any of this," she said.
A Laybuy spokesperson said the item is returned to the retailer not to Laybuy.
"I wonder if it's not actually aimed at a sector of the market that can't really afford the items and are going to get themselves into debt and start paying fees," she said.
Laybuy founder Gary Rohloff refutes the company's model is different to traditional layby purchases.
"This is nothing different to a traditional layby model, the customer's still paying off what they've purchased; they're just getting their purchase to wear today or use today," he said.
Laybuy hasn’t received any complaints about confusion over the system and purchasing process, a spokesperson said.
He said the returns process is no different from what any retailer would invoke today and he said payment by Laybuy wouldn't add any time to this.
The biggest risk for Laybuy is the default risk which is being combatted by working with a credit bureau to give people limits to their layby purchases based on their credit score, Mr Rohloff said. Shoppers limits can increase based on their repayment ability.
He said there have been a "few ratbags" defaulting in the automatic payment system so far.
A customer may be charged $10 if an automatic payment has defaulted and a further 24 hours has passed. If the payment isn't made within a week, another $10 late fee will be added to the customer's bill.
Mr Rohloff said late fees would be added depending on the customer's circumstances and bringing in a debt collection agency would only happen if the bill hadn't been paid for a month.
He said the business removes the need for retailers having to store stock under layby and administrate the service.
How much Laybuy charges businesses was commercially sensitive information, but "it is a fraction of the cost for a retailer versus what they would pay if they were running their own model," Mr Rohloff said.
Adds value for retailers and customers
AUT marketing professor Roger Marshall said the system is a good business model that will add value for retailers and consumers, but buyers will need to have a steady income and not be tempted by instant gratification. He said the system could lead to debt problems for some people.
"I just feel for some people in society they need to be very aware of what's going on and make sure they understand it fully because there are hooks," he said.
Retail NZ general manager Greg Harford agreed it's convenient but said buyers should be aware of the potential for extra charges if payments aren't made on time.
Mr Harford said retailers should look carefully at the costs of the Laybuy service and consider how they compare to other payment methods.
A similar company, Part Pay, is launching online in New Zealand in the coming days, a spokesperson for the company said.
Two of the retailers to sign up for Laybuy, Glassons and Hallensteins, did not respond to requests for comment on their decision from 1 NEWS.