Refund policies in business

Written on the 30 May 2014 by Macmillans Waller Fry - Accountants in Maitland

Businesses have specific obligations under Australian Consumer Law (ACL) when it relates to refunds, returns, guarantees and warranties. It is important that a business’s refund policy comply with ACL.

All businesses have a legal responsibility to consumers. In relation to the sale of goods, these include guarantees that the goods:

  • are of acceptable quality
  • are fit for any disclosed and/or advertised purpose
  • will match any description under which they are sold
  • will have spare parts available for a reasonable time

Refund obligations can be placed into two categories; minor and major faults.

According to ACL, a major failure is when a product or service fails to meet a consumer guarantee, whereas a minor fault occurs when a problem can be fixed easily and in a reasonable time.

The remedy a business is obligated to provide will depend on whether the fault was major or minor.

When there is a major failure within a product or service, the consumer can choose to give the product back, or cancel the service and receive a refund.

When a business receives a refund, the first step they should take is to find out, preferably in writing, what the reason is for a refund request. This is valuable information that can be used to improve the business products and services.

To prevent issues with refunds businesses should ensure that the refund and return policy is easily accessible by customers.

If some goods are unable to be refunded, such as swimwear or perishable products, this must be clearly outlined in the refund policy.

It is important that customers be able to access and understand the policy before making a purchase.

Here are some basic tips when constructing a refund policy:

  • it is illegal to put up a ‘no refund’ sign in store or online
  • if the product has a major failure the business must give a refund, replacement or compensation
  • if a product has a minor failure the business must offer to repair, replace or refund
  • it is the businesses choice whether to provide a refund if the customer changes their mind

Author: Macmillans Waller Fry - Accountants in Maitland

 

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