The end of this week marks the official start of the holiday shopping season. As with every year, stores all over the United States will be looking to jump start sales by offering customers deep discounts on so-called big ticket items. In addition, many of these stores will be offering those customers with bad credit or no credit an alternative form of financing during the holidays.

Specifically, many major discount chains and department stores are reviving layaway plans - a financing option dropped by most retailers back in the 90s due to cost and logistical difficulties.

Earlier this month, however, Senator Charles Schumer (D-New York) expressed misgivings about these layaway plans, claiming that many Americans who use layaway plans over traditional credit cards can actually end paying much more thanks to deceptively high interest rates.

"These layaway programs are nothing more than hideaways for sky-high interest rates that consumers would never tolerate with a credit card," said Sen. Schumer. "The holiday season is supposed to be about giving and not taking, 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."

Consequently, Senator Schumer sent letters to two retail associations - the National Retail Federation and the Retail Industry Leaders Association - requesting that they advise their many members to provide consumers with a more clear explanation concerning how layaway plans actually work.

He also stated that if retailers fail to take action in this area, he will request that the Federal Trade Commission (FTC) to begin exploring whether layaway plans are a deceptive or misleading business practice.

Thus far, retail associations have come out in defense of layaway plans.

"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," said Brian Dodge of the Retail Industry Leaders Association. "They are remarkably simple and transparent. And unlike credit cards, the fees and terms never change."

For those unfamiliar with layaway plans, they enable a customer to buy an item without having to provide the whole purchase price up front. However, they cannot take the item home before they have paid for it in full and must typically pay a fee. The retailer will keep the item off store shelves until the customer completes their payments.

In the event the customer does not make the required payments, the item goes back to store shelves and the customer's payments toward the item (minus the fee) are returned.

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Contact an experienced legal professional to learn more about managing credit card debt/bad credit and fighting creditor harassment.

This post is for informational purposes only and is not to be construed as legal or financial advice.

Source:

Fox News, "Schumer targets layaway charges as next credit fiasco" Nov. 13, 2011