Does your business have a refund policy? Do you know if you have to provide one? Can customers get a refund if they ‘change their minds’?
You cannot say ‘No Refunds’
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A business cannot have a ‘No Refund’ policy. It’s against the law to say you will not provide a refund under any circumstances. This includes sales, gift items and even secondhand goods.
On the other hand, consumers can ask a business for a refund or replacement but are not always entitled to one. If a consumer has, for example, changed their mind or found the item elsewhere at a cheaper price, they are not ‘entitled’ to a refund. This is at the discretion of the business.
Your business does not have to provide a refund for a customer who changes their mind, orders the wrong item, wants to see or try on the item and decides they don’t like it. But there are certain circumstances where you are required to provide a refund.
Five things your refund policy MUST include
There are the minimum refund requirements dictated by Australian Consumer law. As a business owner, you must, at minimum:
- Refund or replace any defective, damaged goods or services. You may only be required to offer a partial refund if the customer has contributed to the defect.
- Repair any minor defect. You can, at your discretion replace it or provide a refund if you are unable or unwilling to repair it.
- Replace or provide a refund on major defects at the customer’s option. You cannot decide this, it’s up to the customer.
- Pay for postage and handling of the item if the cost of the return is significant.
- Offer a refund on defective, damaged, faulty goods and services, including ones which are unsafe or ‘unfit for the purpose’ for which they were sold. You cannot say you offer NO REFUNDS under all circumstances and there is no time limit for customers to request any refund.
This includes all gifts, sale and secondhand items. You cannot carve out minimum refund requirements for certain items your business is selling.
These minimum requirements are not the only things you should consider when deciding your refund policy.
Five important things you should do before finalising your refund policy
When you are working out your refund policy you need to consider the commercial side of your business. If you are selling clothes or shoes, for example, customers will want to try things on. Your refund policy is a powerful marketing tool for your business and you need to ensure you are competitive in all aspects of your business.
In determining your refund and exchange policy for your business, it’s important to do your research:
1. Rethink your refund or exchange policy for ‘change of mind’: If you have a strict refund policy where they cannot return or exchange goods, you may have difficulty selling anything. Most successful e-commerce websites offer good return and refund policies, particularly for clothing, shoes and other items that need to be tried for sizes, colours, and fit.
2. Consider your shipping and handling fees: If you have a refund or exchange policy that requires customers to pay for shipping and handling of exchange or refund, this may also deter potential sales. Consider including postage and factoring this into your prices for all sales.
3. Check refund and exchange policies of other similar competitors: Ensure you are matching the market competition and purchaser demand as often the refund policy is a key factor in a customer’s purchase.
4. Offer to pay for return of faulty or damaged goods: If you have faulty or damaged items, consider whether you want to pay for their return at your cost.
5. Make the process simple: Consider making all refunds and returns as simple and painless as possible. It should be both easy on customers and a simple process for your business to save everyone time and money.
Online sales of goods and services have a lot of competition these days. You have to know both the requirements for refunds as well as what your business should be doing.