FINED: Chrisco's cancellation policy meant that the company recovered more than it should have under the Layby Sales Act.

Christmas hamper company Chrisco has been fined $175,000 after pleading guilty to breaching the Fair Trading Act by misleading customers about their right to cancel laybys.

The sentence was handed down in the Manukau District Court a short time ago.

Chrisco supplies food hampers and other products on layby to its customers for Christmas, with payments spread over the year. Under The Layby Sales Act, customers have the right to cancel at any time. It also governs what a seller can charge a customer when they cancel.

Between 2008 and 2010, Chrisco operated a cancellation policy where customers were charged 20 per cent of payments already made if they cancelled up to 90 days prior to the final payment date, the Commerce Commission said.

If they cancelled within 90 days of the final payment date, that fee was increased to 50 per cent of payments already made.

Following an investigation by the commission, Chrisco pleaded guilty to 10 charges under the Fair Trading Act. The breaches related to customers being mislead about what they could be charged if they cancelled at a particular time, how they could cancel, and in some instances, at what point in time they could cancel.

"Chrisco's cancellation policy meant that the company recovered more than it should have under the Layby Sales Act, so customers were overcharged," said Graham Gill, Commerce Commission Competition Manager.

"As the fee was worked out as a percentage of payments already made, some customers ended up being charged hundreds of dollars. In a few cases the fee was as much as $800."

As a result of the Commission's investigation, Chrisco reviewed and amended its cancellation policy to be 20 per cent of payments made with a cap of $250. It also retrospectively refunded approximately 750 customers a total of $141,735 using the amended cancellation policy.

Chrisco also pleaded guilty to charges relating to its Toys and Gifts Catalogue and its Headstart Plan.