When you’re a shopper, you probably won’t think twice about paying someone to take your items, but you could soon be paying them to resell them.
That’s what consignment retailers are now being accused of doing when it comes to the sale of goods to consigners.
The problem: you can’t get rid of the goods you bought.
The solution: let them go for free, but keep the price.
“Consigners can often get away with charging people to take their items, as long as they’re not selling them for less than the fair market value,” Dan Faulders, a partner at the law firm Hogan Lovells, told Business Insider.
“But in many cases, the consignor is not a big retailer and can’t afford to pay for the items sold to them.”
In the US, there’s a loophole in the law that allows consignors to charge buyers for items that they don’t own, and that has the potential to be exploited by people looking to resel their own goods to customers.
The problem is that if the seller is an online or brick and mortar retailer, the seller can often claim that their items are “sold” in exchange for goods.
This is known as “consignment” or “free-from”.
The catch: the buyer of an item that you bought for the “free” will be able to claim the purchase back from you at a later date.
But if you’re buying a consignable item online or on the web, you won’t be able access the auction house to claim your purchase back, according to Fauldings.
So the buyer will have to buy an item on eBay, buy it back on Amazon, or resell it to a consigning service such as an auction house.
This is where the consigning shop can take advantage of the loophole.
If you’re unsure whether the items are consigned for free or not, Faulding explained that the buyer could contact the seller to see if they can give the buyer a refund.
But this could be expensive and difficult, and the buyer would have to pay their fair market price, so it’s not a good option.
“If the seller doesn’t have the money to do that, they can also just charge you for the item and give you a refund,” he said.
But Faulds said that there was a way around this.
Consignments, even those that are not sold online, can be auctioned and paid for on eBay or Amazon.
“You don’t need to be a big online retailer to get a consigned item for free,” he explained.
“The consigner is probably a small brick and marble retailer or online retailer, so there’s no way to track that.”
This allows the buyer to reseal the item for a profit and still claim a refund on the sale.
Faulders said that the law should be amended to allow consignments to be sold to consumers and resellers without having to pay a commission.
“This loophole has led to a whole lot of fraud going on online and in consignment stores,” he added.
“This has the unintended consequence of allowing consumers to buy consignables without the seller being aware of the consignment.”
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