Dear lifehacker, What's the deal with non-refundable deposits? I've been caught out and pressured into a transaction before when I've put down a small amount of my hard earned cash as a deposit and having second thoughts isn't a good enough excuse to change your mind. Is taking a non-refundable deposit against consumer law or smart business? Ripped off
Picture by Ben Husmann
Dear Ripped Off,
The particulars of your deposit will be contained in the contract you signed at the time of first payment. Whether you realised it or not, this was a legally binding agreement between you and the seller.
Businesses are allowed to charge a termination fee if a consumer decides to cancel their lay-by. This is ostensibly to cover the seller's outside costs, such as being forced to discount the item due to seasonal changes or the emergence of newer technology.
The maximum they are allowed to charge varies from state to state. In Queensland, the non-refundable deposit fee cannot exceed $100, for example. In NSW, however, the trader may be entitled to retain all of your deposit.
As the NSW Fair Trading website explains: "The actual amount the trader is allowed to retain depends on the circumstances. This money compensates the trader for the time and expense devoted to the transaction, but should not be so high as to constitute a penalty."
As you only paid a small amount, it unfortunately looks like you may be out of luck. The moral to the story is to always carefully read any document you are asked to sign so you know what the potential penalties for pulling out are.
However, if the termination fee was not stipulated in the written agreement, the business is required to refund the full amount that the consumer has paid. By Australian law, all terms and conditions relating to laybys/deposits must be laid out in writing in easy to understand language, including any termination charges.
It therefore might be worth re-checking your contract: it could contain the loophole you're looking for. If you think you've got a case and the seller refuses to play ball, contact your state consumer protection agency.
Got your own question you want to put to Lifehacker? Send it using our contact tab on the right.