The Fair Trade Commission, a consumer protection group, has recently suggested that American consumers take some precautionary measures before agreeing to buy anything with a layaway plan.

What Is Layaway Plan?

• Traditional layaway: These programs work by allowing you, the consumer, to buy goods bit by bit. Rather than using cash or a credit card, you can make regular payments to a retailer and receive your item only when you’ve paid its full price. The name refers to the physical act of setting aside or laying an item away until the customer has fully paid for it.
• Contemporary layaway: Today, layaway programs still exist, but are no longer confined to stores’ physical locations. Online layaway programs allow you to make payments to a layaway company, which acts as a middleman between you and a retailer, and then have your item delivered when you’ve completed payments.

Protecting Yourself When Using Online Layaway Sites

Online layaway services each work a little differently, but they have the same basic structure:

1. Online retailers post their items. You select which item you want to buy.
2. Online layaway firms allow you to set up a payment plan to cover the cost of the merchandise.
3. You make payments (by check, money order, debit or credit card) according to the agreement.
4. When you’ve paid for your item completely, the layaway company sends money along to the merchant and the merchant sends you your purchase.

Nowadays, you can pay for anything from furniture to vacations to planned surgery with a layaway program.

Before agreeing to a layaway plan, though, make sure you understand these crucial items:

• Terms of the layaway plan: Reading the information provided will help you determine whether there’s a limited time to make payments, a minimum payment required, service fees of any kind, and penalties or fees for late or missed payments.
• Cancellation options: Will you get a refund if you decide you no longer want the item? Some companies offer partial refunds; some do not. You may be charged a non-refundable fee even if you back out of the agreement. Be sure you know your options for getting your money back if you change your mind.
• Reputation of the business: Online companies can be more difficult to evaluate for seediness than real-life ones. To determine the credibility and reputation of the firm you’re working with, check with your local Better Business Bureau (www.bbb.org), your state’s attorney general (www.naag.org) and your local consumer protection agency (www.consumeraction.gov).

Pssst...

If you've been the victim of a bad layaway plan and you're slipping behind on all of your bills, filing bankruptcy may be an option for you.