Schumer warns consumers on layaway fees

Holiday shoppers who choose to buy gifts this season using big-box store layaway plans will get a "raw deal" and be hit with fees heftier than the highest of credit card interest rates, Sen. Charles Schumer said Sunday.

But the Arlington, Va.-based Retail Industry Leaders Association, which Schumer (D-N.Y.) said should encourage members to be "forthright" about fees, defended layaway plans as a "responsible, low-cost alternative to credit cards," allowing consumers to shop without accumulating debt.

Spokesman Brian Dodge said layaway shouldn't be compared to credit or a loan. "Layaway is remarkably simple and transparent," Dodge said in an email. "And unlike credit cards, the fees and terms never change."

At a news conference at his Manhattan office Sunday, Schumer said, "These new layaway programs are a whole lot different than your mother's layaway program . . . It's not the nice retailer letting you pay week by week. There's all sorts of complicated and not-very-good-for-consumers bells and whistles."

At Walmart, for example, a $69 Let's Rock Elmo doll would be purchased with a $5 layaway fee and a 10 percent down payment. There would also be a $10 fee for not paying in full by Christmas.

The senator stopped short of calling the practice predatory, but implored retailers to prominently post the interest-rate equivalent of layaway fees for customers.

If retailers don't comply, he said, he plans to ask the Federal Trade Commission to investigate whether layaway is a deceptive or misleading practice.

Toys R Us, Wal-Mart and Sears -- whose layaway plans Schumer criticized -- could not be reached for comment.