E-commerce

Small businesses urged to check if their refund and return policies are legal

Managing refund and return policies can be challenging for small businesses to navigate.

On one hand, you want to protect yourself from customers taking advantage of generous returns and refund policies and sending back items that cannot be resold.On the other hand, you don’t want to receive a notice from the regulator because your policy is not compliant with the Australian Consumer Law (ACL).

The Australian Competition and Consumer Commission (ACCC) recently reviewed more than 2,000 Australian retail websites to check whether their return policies and terms and conditions complied with the ACL. The review found several common practices that could mislead consumers about their rights to a refund, exchange, or return products.

“Change of mind” policies

Businesses do have flexibility when it comes to offering refunds for change of mind. These are refunds where no consumer law warranties apply – situations where the goods are not faulty, are fit for the purposes they are advertised for and meet the description provided.

In these cases, businesses have more flexibility to set strict timeframes for returns, determine whether goods must be returned with original packaging, and exclude sale items from return policies.

However, it is essential to clearly communicate these restrictions and avoid misleading customers about how generous such policies are.

“No refunds”

There is much less flexibility to apply blanket rules where consumer law guarantees are in play. Broad statements such as ‘no refunds or returns’ are likely to be non-compliant, as they mislead consumers into thinking that their mandatory consumer law rights do not apply.

“In original packaging”

If a product is faulty or doesn’t meet the consumer law guarantees, it doesn’t matter if it is no longer in its original packaging, as the consumer is unlikely to have anticipated the fault when disposing of the packaging.

Additionally, they shouldn’t be required to go through a manufacturer to secure a refund, as the retailer is who they dealt with to purchase the product.

“No warranty”

Under the ACL, mandatory warranties apply to goods or services sold to consumers for less than $100,000 or that are typically purchased for personal, domestic or household use. It is considered misleading to suggest otherwise in refund policies.

Other practices to avoid

The ACCC review identified several practices that may mislead consumers, including:

• Imposing time limits for returning faulty products
• Applying blanket ‘no refund’ conditions on sales or specialised items
• Stating that consumers can only claim remedies for faulty goods through manufacturer warranties
• Restricting consumer rights, such as making delivery fees for faulty items non-refundable or charging restocking fees for returned faulty products.

Some of the problematic statements flagged included:

• “Items that have been opened and used cannot be exchanged or refunded”
• “Made to order products cannot be returned”
• “Sale items cannot be returned, exchanged or refunded”
• “In the unlikely event that your item arrives damaged or faulty, please notify the store within 30 days of delivery to receive a replacement”.

What to do now

If any of the above sounds familiar, it may be time to review your business’ terms or refund policies to avoid potential enforcement action from the regulator.

For small businesses to stay compliant, it is vital to review your agreements with manufacturers to ensure you have coverage for faulty goods and that the manufacturer will reimburse you where consumers need to be refunded or provided with a replacement product.

In addition to reviewing your business’ returns policy and procedures, you should also consider training employees on how to handle refund requests to ensure they do not misrepresent to consumers their rights, and review other product and marketing material to ensure your claims on warranties and refunds are consistent.

This story was originally published on Inside Small Business.