Being Waylaid by Layaway Purchase
Question: I am curious as to whether there is any law regarding the charges and fees that can be made in connection with layaway merchandise. I bought a silver tea service from the David Orgell store in Northridge. The price was about $800 and I paid $170 down and signed an agreement that I would complete the purchase within 90 days--although the clerk told me that this rule wasn’t enforced literally and that if I made regular payments, it could extend beyond 90 days. The agreement also said there would be a 20% restocking fee and service charge if I decided against going through with the purchase.
Later, I had second thoughts about the tea service and decided to cancel the deal. I called the store and told them so and asked for the refund of my $170 payment--less the restocking fee. When the check arrived it was for $11.32! I called to protest and pointed out that 20% of $170 was $34, not $158. I was then told that the 20% restocking fee referred to the total price, not the amount paid down and that it was “tough luck--you signed the agreement.” I had thought that even 20% of the down payment, $34, was a pretty stiff fee for restocking because all that is involved is carrying the tea service a few feet from a back room to the selling floor. Isn’t there a legal limit on this sort of charge?--R.W.
Answer: Not really. Since 1975, however, there’s been a law on the books requiring the store to provide you with a written agreement spelling out the terms of the layaway, the down payment and the charges involved or what-have-you, as long as the customer understands what he is signing.
But, according to Ron Reiter, California state deputy attorney general, specific ceilings for “restocking” fees or “termination” fees or whatever--either in terms of dollars or as a percentage of total costs--are not spelled out in the law. Your only recourse, really, would be to sue the store in Small Claims Court for recovery of the rest of the down payment, which, in turn, Reiter said, would put the store in the position of proving that the 20% levy was a reasonable charge for the “liquidated damages” entailed in your cancellation of the layaway.
Roger Orgell’s general manager, Sally Botu, remembers your case well because she was training a new manager at the Northridge store earlier this year and is the one who discovered your tea set still in the storage room, unclaimed. Her position, however, is that you have tiptoed around the subject of just how long this expensive set of silverware was actually out of circulation.
“He bought the set in January and signed the agreement to pay it off and pick it up within 90 days. Then there weren’t any further payments, and he was contacted and reminded of the agreement, in August,” Botu added. “At that time, he told us he had some problems and had been out of the country, but would begin making payments and would pick it up in October. He called again in September and said the same thing. But no more payments were made, and in October, we were unable to contact him, because his service was no longer taking messages for him.
“It’s a very expensive thing to hold merchandise off the floor for more than nine months like this,” Botu said. “We could have sold that set several times over. We don’t really like to do layaways because of the storage space it requires, but we also like to help, so if this is the way the customer wants it, we’ll go along with it. But we’re also pretty emphatic about the terms--paying a third of the cost down and then paying it off and picking it up within 90 days.”
But a restocking fee equal to 20% of the total price?
“Oh, we always try to give some leeway,” Botu said. “Whenever a customer has some extenuating set of circumstances . . . some problem . . . a death in the family, or something like that, we try to be flexible. But you have to remember that in this case, he never did say he had changed his mind. He just never paid anything more and the merchandise was off the shelf almost 10 months. We try to be understanding, you know, but there are times. . . . “
Botu’s less-than-enthusiastic attitude about layaways as a merchandising tool is pretty standard, according to the vice president of a major Los Angeles department store chain who requested anonymity.
“It used to be very popular years ago, at least with consumers--during the Depression, for instance--when credit, as such, wasn’t very prevalent. But it began slipping out of favor about 40 years ago when stores started issuing credit cards. But what really killed it off, for all practical purposes,” he said, “was the introduction of the bank cards. All of sudden, most of the reason for the layaway--paying for a big-ticket item ‘on time’--didn’t apply any longer.
“Even under the best of circumstances, the layaway was always a pain in the neck. Cancellations were high and almost invariably the merchandise, when it was returned to stock, was out of season. We, and most other major retailers, just plain don’t do it any longer, although you still find some stores--generally smaller ones--offering layaways.”
Q: I recently received through the mail an offer to sign up for a Citicorp credit card--one of about a dozen a week I receive. This one, however, I decided to accept because of several inducements that accompanied it.
Not long after I got my card, I received a telephone call from a woman representing Citicorp who welcomed me as a new cardholder. She then proceeded to try to pitch me on various purchases that I could make with my new card. Isn’t this a new gimmick?
In the past, the bank just simply sat back and waited for me to use its card--any telephone sales pitches came from the retailers and direct mail companies themselves.
How come the banks themselves are getting into the selling of things in which they have no real interest--except, of course, for the interest they earn when I use their card in buying something?--D.L.
A: It sure beats Jerry Lovell, director of sales and marketing for TelExcel, the telemarketing division of Venice-based George Walther Inc.
“I’m familiar with most telemarketing techniques in use today, and the only cases where you find the banks, themselves, selling by phone,” Lovell said, “is when they’re trying to sell their own products and services--their savings accounts, home equity loans, mortgages, CDs and things like that. I can’t see any real advantage in a bank trying to sell someone else’s merchandise for them.”
Lovell’s guess: The lady calling you wasn’t representing Citicorp, but some telemarketing firm, which, somehow, had obtained a list of Citicorp’s new credit cardholders. She undoubtedly began her pitch by congratulating you as a new Citicorp cardholder and you inferred she was speaking for the bank.
But Lovell concedes that your basic premise is on target: that there’s very little incentive for a bank to hawk somebody else’s merchandise.
Be that as it may, Bill McGuire, a Citicorp spokesman in New York City, said the corporation does indeed offer certain products and services to cardholders.
“The majority of things we bring to the attention of our customers are basic enhancements or extensions of the card itself, such as dining, travel and shopping services,” he said.
He added: “We would allow a vendor to make an offer to some of our card members if we thought it was a valuable service or product.”
McGuire said also that “card members have the right to tell us they don’t want to receive such offers.” This can be done by writing or by calling the customer service phone number on the billing.
Don G. Campbell cannot answer mail personally but will respond in this column to consumer questions of general interest. Write to Consumer VIEWS, You section, The Times, Times Mirror Square, Los Angeles 90053.
