Take it or Leave It – Your Obligations to Provide a Refund
Avoid getting in trouble with Consumer Affairs and the Victorian Civil and Administrative Tribunal by knowing when you must provide a refund to your customers. The obligations are set out in the Australian Consumer Law (ACL) and your own terms and conditions. Here is a brief (and simplified!) overview:
- Change of Mind
The law does not require you to provide a refund where the customer has simply had a change of mind. A change of mind includes where the customer no longer wants the goods, has found the goods elsewhere for a cheaper price, has found better goods or decides that he or she no longer needs the goods. Think of a change of mind as circumstances where there is nothing wrong with the goods themselves.
Although the law does not mandate a refund, your terms and conditions or practices can allow for customers to receive a refund. You should consider whether this will create more appeal to your business and set it apart from your competitors, especially if you are offering goods for sale online!
- It’s Your Fault
The goods you sell are covered by consumer guarantees, which allow a customer to receive a refund, repair or replacement of faulty goods. You cannot limit these rights under the law.
Faulty goods can include goods which do not work, have a defect, are unsafe or are not durable.
Depending on the problem with the goods, it will be either a minor or major problem. Where there is a minor problem, you may first opt to try to repair the problem or send it to the manufacturer to repair. However, where there is a major problem, the customer may receive a replacement or refund. Whether it is a minor or major problem will be dependent on the type of product, how it was used, and the general life of the product. For example, where a laptop continually shuts down within the first week of purchase, this will be a major defect as it effectively cannot be used.
Whilst the minor or major problem is the main rule, there are of course, exceptions to the rule. The exceptions revolve around the actions of the customer and include:
- Where the customer is responsible for creating the problem with the goods;
- Where the customer was informed of the defect prior to purchasing the goods; or
- Where the customer is unable to substantiate that they purchased the goods from you. This can usually be proven with a receipt or bank statement. You should also check your own records.
- Illegal Signage
Be careful not to have signs in your business or online which are illegal under the ACL. These are signs which incorrectly portray your right to refuse a refund. They often include blanket statements, such as:
- “No refunds”;
- “Exchange only for sale items”;
- “No returns accepted”.
If you have the above signage or phrases in your terms and conditions, you are likely breaching the ACL and engaging in misleading and deceptive conduct.
If you need help with deciding whether to provide a refund to your customers or reviewing your terms and conditions, contact one of our experienced commercial law team members at Taurus Legal Management on (03) 9481 2000 or email@example.com.