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Layaway Fees Waived

posted by John Pottow

We've posted before about Layaway's resurgence after the Great Recession.  A new development: gearing up for the holiday season, many major retailers are waiving their layaway fees, and consumers are responding positively. Here's KMart's.  Also, embargos on various popular products are now being lifited.  This leads me to belive that Layaway's resurrection (in places where it died) may be long-lasting.  It seems that spending on layaway items has gone up in response to this campaign, which makes me wonder: is this just another way to drive foot traffic as the payments are made?  And if so, is there anything wrong with that?  Layaway, it occurs to me, has financing simplicity of the sort that should make the CFBP dance, so if customers like it, and it prevents consumer debt on excessive interest terms, isn't that a good thing?


Most of the consumers the layaway retailers are after have no other way to obtain consumer debt and probably don't need any other debt-like obligations. I'm not convinced that this arrangement is in their best interests. They need to get out of the debt hole they've dug rather than digging it deeper through layaway. On the bright side, I suppose these layaway programs will be increasing business for bankruptcy lawyers.

There are certainly ways retailers could take advantage of layaway, but as a means of buying a large item it seems better than the alternatives. Many low income people can't or won't save. Ideally they should learn to save a little at a time and buy the large item with the saved money, but that's a separate argument. In the context of current behavior, layaway (reading Kmart's contract) seems quite reasonable. If all payments are not made, there is a relatively small cancellation charge. This is cheaper than most loan or rent-to-own alternatives and cancelling a layaway contract should result in less emotional anguish than having the product repossessed for non-payment.

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