Illustration: Colin Daniel

Finding the perfect pair of shoes, but then not being able to buy them because of budget constraints, is frustrating, as we all know. To assist cash-strapped customers, more retailers are offering a lay-by option. This means you can reserve an item and pay it off in instalments before taking ownership.

Although this payment method is interest-free and therefore better than buying on credit, consumers need to protect themselves by ensuring that the lay-by agreement reflects the protective measures in the Customer Protection Act (CPA).

The lay-by payment method allows you to pay off the goods over an agreed period, with the retailer keeping the goods until you have paid the full price. Usually, you pay a deposit upfront and make regular payments within the payment period until the total price is paid.

However, if you can no longer afford the payments – or simply change your mind – the retailer must give you your money back and charge no more than 1% of the purchase price as a cancellation penalty. The CPA limits the penalties that retailers can charge for cancelling a lay-by agreement. It also prohibits retailers from charging a penalty if they failed to inform you of this penalty before you entered into the agreement.

Therefore, make sure you are an informed by understanding the CPA and your rights as a consumer. This will prevent you from paying more than you need to. If you understand your rights, you will be able to ask the right questions before you enter into any agreement. 

Also, make sure you understand the escalation channels if you experience any problems with your lay-by purchase. If you believe a retailer is not complying with the CPA and you’re unable to resolve the matter directly, you can lodge a complaint with your regional consumer office or the National Consumer Commission.

Make sure you take the time to understand the terms and conditions of any agreement you enter into. Better still, try to avoid unnecessary purchases by factoring “wants” (luxury items that are not necessities) into your financial plan. Working with a professional financial adviser will help you to balance your needs and goals, and to stick to your plan so that you can make those “wants” a reality.

Tristan Naidoo is a legal adviser at Old Mutual Personal Finance.