Refund policies in business

Businesses have specific obligations under Australian Consumer Law (ACL) when it relates to refunds, returns, guarantees and warranties.

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 businesses 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

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

To prevent there from being 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.

It is also important that the businesses refund policy complies with Australian Consumer Law. For example, it is illegal to not offer a refund if the goods are faulty.