Australian Diamond Trading Corporation
Australian Diamond Trading Corporation
Australian Diamond Trading Corporation
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Articles from INDUSTRY ASSOCIATIONS (262 Articles)

Customers have been demanding refunds on orders they have made payments on.
Customers have been demanding refunds on orders they have made payments on.

New lay-by loophole stings jewellers

Jewellers have reported customers reneging on custom-made orders and demanding refunds, leaving the jeweller with the finished product but no money and it’s completely legal.
An amendment to the Trade Practices Act in 2010 has made way for customers to claim jewellery orders are lay-by agreements, without retailers being aware, when they have made more than one payment prior to receiving the product,

The law has caught several Australian jewellers off guard, with some losing substantial amounts of money on special orders that customers have backed out of before final payments.

Colin Pocklington, director of Nationwide Jewellers, told Jeweller some Nationwide members had reported customers claiming lay-by refunds, but many retailers were unaware of the issue

“The vast majority of retailers have no idea about this,” he said. “It came into play in January in 2010, with changes to the Trade Practices Act. There were a lot of changes to warranties, but people didn’t pick up the implication with special sales with more than one payment becoming a lay-by.

“We were already onto it because one of our members had a diamond ordered in for a customer that they wouldn’t normally stock,” he continued. “The customer made a deposit and two later payments and had nearly paid for it all. The store had it engraved with the customer’s name, and then the customer decided they just didn’t want it anymore.”

Pocklington said the store told the customer the payments were non-refundable but the customer took the case to the Office of Fair Trading, who ruled in favour of the consumer.

“Fair Trading Victoria said that because the consumer made three payments, under new laws it was effectively a lay-by, so the customer can terminate any time, less reasonable expenses,” Pocklington explained. “The retailer can’t even claim the costs of the goods, you’re only allowed to claim a ‘reasonable amount’ on the cost of transaction.”

Nationwide had also received several other similar reports from its members on a lower-price scale.

The problem is widespread with another Sydney retailer explaining how a customer ordered a number of custom-made, gold bangles totalling $8,000 at retail. The retailer took an initial deposit from the customer and after making a number of progressive payments totally $7,000 the customer backed-out of the order.

The retailer, who asked not to be identified, told Jeweller last week that she had to refund the $7,000 and was left with the completed jewellery items made specifically for her customer.

Pocklington said jewellery retailers rarely advised customers about cancellation fees because they didn’t believe they were entering a lay-by arrangement. He said retailers stood to lose the most on special orders.

“If you stock the jewellery in shop already it’s not a huge deal,” he said, “but it really hurts on special orders. It could be hard to sell the piece to someone else, especially when they’ve designed something specifically for one customer, and you lose quality when you have to re-use these unclaimed pieces.”

Pocklington believes the chances of the Australian Government addressing the problem are remote, and cautioned retailers to be more vigilant.

“Jewellers have to be more astute and more aware of new laws,” he said. “You must only take one payment and then a final payment, and the deposit must be substantial and cover at least the cost of the goods, not just a nominal payment. By getting the customer to agree it is a special order, it cannot be a lay-by.”

Pocklington said the JAA was producing a sale receipt folder that will ensure both retailers and customers agree to special orders terms. The materials should be available by the Sydney Jewellery Fair, but possibly earlier.


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