Are Refunds Really Necessary?

Sales might have been down this Christmas. But one thing is for certain – a good number of people received presents they don’t want, that don’t fit, that aren’t the right colour, or that they’ve now got two of.

If they don’t try selling their unwanted presents on e-bay they will probably try for a refund.

The ‘Big Boys’ of business offer a refund in just about all cases – sometimes even without the purchase receipt. Some customers now expect that every business will do the same.

But if you are a small business unnecessary refunds can leave you out of pocket, with an item you can’t sell.

Sure, in some cases a refund which you are not obliged to offer can be a good business move building customer satisfaction, goodwill and preventing word of mouth reputational damage.

Knowing what you’re obliged to do is a solid start to developing or reviewing your refund policy.

When are you obliged to provide a refund?

While each State and Territory has their own laws, generally businesses are required to provide a refund only where the product:

· is faulty
· is not the same as advertised / described
· does not do what it is supposed too
· does not match a sample provided
· does not last a reasonable amount of time, given the price paid.

This is referred to as a statutory warranty. Advertising a refund policy or statement which implies that you will not provide a refund in these circumstances can land you in ‘hot water’ for misleading conduct.

Online Retailers

Small retailers sometimes try to put additional restrictions on refunds. Online retailers in particular sometimes forget that they are covered by the same statutory warranty laws as brick and mortar retailers and have refund policies which are misleading.

Last year the Australian Competition and Consumer Commission (ACCC) took action against one of Australia’s largest online retailers over their refund policy which included, amongst other things, a restriction on only being able to return goods within 30 days.

Recommended Refund Policy

The Queensland Office of Fair Trading recommends that refund signs be worded:

“Please choose carefully. We do not normally give refunds if you simply change your mind or make a wrong selection. You can choose between a refund, exchange or credit where goods are faulty, wrongly described, different from a sample shown to you or don’t do what they are supposed to do.”

Contact the Office of Fair Trading or Consumer Affairs in your State or Territory to find out what wording they recommend.

Give your business a quick compliance check:

· Check your website’s refund policy – many small business people simply ‘cut and paste’ their policy from a larger businesses website without checking for accuracy. The ACCC is currently sweeping online retailer websites looking for non-compliance.

· If you have a refund policy sign in your shop check it for accuracy – get rid of those ‘No Refunds’, ‘No Refund on Sale Items’, ‘Exchange, Repair or Credit Only’ signs and the like.

· Check your cash register dockets and receipts for statements about refunds and make sure they are correct

· Talk to your staff and make sure they understand your refund policy.

Blue Mercury Consulting are compliance and risk consultants for small business. They publish a free e-magazine called Queensland Compliance Monthly for small and medium-sized businesses to keep up to date with their regulatory compliance obligations.