Black Friday 2011: Layaway Makes a Comeback, but Senator Schumer Pushes for Clarification

Follow us

"This year, because our customers told us they wanted it and needed the option, we brought it back just for the Christmas season," Raddohl said. "It was an incredible demand, and so far, we're seeing an incredible response."

Wal-Mart is far from the only company to reintroduce or bring back layaway programs. They were nearly extinct or simply out of use until 2008, when the credit market fell and the global recession began. Now, retailers looking to cater to lower- to middle-income customers who can't or won't opt for credit cards to pay for bigger gifts are re-instituting the old practice.

Not everyone is on board, however, most notably U.S. Senator Charles Schumer (D-N.Y.). Schumer's office didn't respond to multiple requests for comment for this story, but the senator told The Associated Press last week that stores need to make more explicit the rules, regulations and fees associated with layaway programs.

Schumer told AP that, for example, the true cost of a rock 'n' roll Elmo doll priced around $50 that requires a onetime $5 layaway fee and 10 percent down payment would equal a credit card that charged more than 100 percent interest.

"The holiday season is supposed to be about giving and not taking," Schumer said. "But these layaway programs are taking advantage of people and charging them outrageous interest rates, under the guise of making it easier and more affordable to shop."

Schumer sent a letter to two major retail associations -- the Retail Industry Leaders Association and the National Retail Federation. In the letter, he asked the groups to recommend their members to clarify layaway stipulations. He said if stores don't take action, he would ask the Federal Trade Commission if layaway has become a misleading practice.

Brian Dodge, the senior vice president of communications and state affairs, however, said that layaway options are ideal for consumers unable to access credit cards.

"Layaway is neither credit nor a loan," Dodge said in a statement emailed to the IBTimes, referencing Schumer's letter. "These programs are highly regarded and sought after by consumers who are either unable or unwilling to access credit. Layaway programs provide consumers with a responsible, low-cost alternative to credit cards that allow customers to buy an item that they want but the flexibility to pay for it over time without accumulating debt."

But Nadine Sampter, a staff attorney for the FTC, said in a phone interview that she can see why Schumer would be interested in getting the FTC's attention on the subject of layaway. Because it's not credit, layaway is not covered by federal law and is largely governed by state contractual laws. However, it's also a consumer issue that, in a lot of ways, is similar to credit.