When you are dealing with customers and refunds, it is best to be cool and calm at all times [easier said than done on occasion].   When a loud-voiced customer comes into your shop demanding a refund, even though legally they are not entitled to one, try and deal with the situation rationally and calmly.  If possible, move the customer to a quiet part of the shop and have a senior staff member deal with the unhappy customer.

Why? Because statistics show that a happy customer will become a loyal customer.  These days retailing is becoming more and more competitive and trying to build up loyal customers is probably the hardest part. But, if you succeed it will be worthwhile in the end.

It is always a good investment to have all staff trained on your service standards and how to handle customer complaints as customers don’t want to be bandied from one person to another to another.  Ideally, they’d like the first person they approach to fix the problem.

Automatic Legal Rights to Return

As a basic premise, a customer has no automatic legal right to return goods to a retailer and seek a refund. 

However, a customer is entitled to a refund on goods purchased under the following circumstances:

• If the customer was induced into buying the goods by misrepresentation.
• If the goods have a fault about which they could NOT have known at the time of purchase.  Customers CANNOT complain about defects that were pointed out to them at the time of purchase.
• If the goods are NOT of merchantable quality – a basic level of quality and performance that would be reasonable to expect, bearing in mind the price and the way the goods were described.
• If the goods do not do the job the customer was led to believe they would do.
• If the goods don’t match the description given when ordered.
• If the goods don’t match a sample shown when ordered.

A customer may also claim compensation for any loss or damage caused by faulty goods.

Retailers do NOT have to provide a refund or credit note if a customer has discovered AFTER THE PURCHASE that they could have purchased the goods at a cheaper price elsewhere.

• The time limit for a customer to seek a refund is dependent upon what is reasonable in the circumstances of the particular goods or services being purchased.  When customers have problems with their purchase(s) they should bring these problems to the attention of the retailer promptly.

• The goods need NOT be returned in original packaging to obtain a refund.

• A receipt or proof of purchase should always be requested whenever a refund, exchange or credit note is requested.

• A refund should always be given in the manner in which the original purchase was paid for unless otherwise agreed by both the customer and the retailer.

 ‘No Refund’ Signs

Retailers don’t have to use signs which enunciate their policy regarding refunds/returns, but if they are to be used, then they must clearly state what customers are entitled to.   The signs don’t have to be long and complicated – shorter signs can be used as long as they don’t mislead the customer.  Disclaimers printed in small type can be considered as misleading, as customers may not see them.

Signs which enunciate the refund/return policy of a retailer should be positioned as close as physically possible to the entrance(s) to the store.  This way, the customer is unable to enter the store and make his or her purchases without having been deemed to be in possession of knowledge of the retailers refund policy. 

There is no point in placing refund policy signs at the cash register – the customer has already made their selection (if not already completed the purchase) and therefore cannot be said to have made the purchase in full knowledge of the retailers’ refund policy.

Signs that impose time limits for returning goods are illegal because they mislead customers about their rights.

Commonly displayed signs that breach the Trade Practices Act are:

‘No refunds’

‘No refunds after 7 days’

‘No refund or exchange’

‘We will exchange or repair or give credit notes but we do not refund’

A sign which says:  ‘Please choose carefully as we do not give a refund or credit note’ is also illegal as that sign would falsely represent the rights of a customer.   Any sign displaying a refund policy should also state that proof of purchase is required.

Examples of Acceptable Signs

• If goods are sold by sample (e.g. curtains, blinds, tiles or bricks), then the following sign could be used:

‘No refund unless goods are faulty or do not match the sample you were shown’

• If it is mechanical, electrical or electronic goods being sold (e.g. personal computers, stereo systems etc.), many customers would rely on the advice of a specialist salesperson.  The sign could say:

‘No refund unless the product is faulty or does not do what we said it would’

• Whitegoods are an example of goods sold on the basis of what they can do, i.e. an automatically defrosting refrigerator.  In this case, you could use a sign saying:

‘No refund unless goods are faulty or do not match description’

• Retailers may want to tell their customers they cannot expect a refund if they change their mind.  In this case, the following wording could be used:

‘Please choose carefully.  We do not normally give refunds just because you change your mind’

Source:   Australian Competition & Consumer Commission publication “Warranties & Refunds”

The following refund policy sign has been endorsed by both the Ministry of Consumer Affairs & Business (Vic) and the Australian Competition & Consumer Commission.

‘Our Refund Policy:

Please choose carefully.

We do not normally give refunds if you simply change your mind or make a wrong decision.

You can choose between a refund, exchange or credit note where goods are faulty, wrongly described, different from a sample shown to you or don’t do what they are supposed to do.

Please retain your receipt for proof of purchase’

How Should You Refund?

Consumers can insist on cash refunds if they paid in cash.  If they used shop accounts or credit cards then they can ask only to be re-credited the amount.

If goods were bought on terms, consumers are entitled to refunds on any payments made, and to have any outstanding balance on the goods cancelled.

If goods have had a fair amount of use consumers may be entitled to part refund or repair only.

Proof of Purchase

If you aren’t sure whether the goods were purchased from your shop and you don’t know the customer and the customer can’t provide proof of purchase; i.e. cash receipt, credit card slip, then you, the retailer, are not obliged by law to refund.

Retailers who have “no questions asked” refund policies have over recent years been experiencing increases in refund fraud, i.e. the goods are stolen from the shop and returned for a cash refund.

Perhaps the following guidelines, when issuing refunds, could be helpful.

            Cash receipt, credit card slip.

            Place signage or warning printed on register docket:

            e.g. ‘Please retain this sales docket as proof of purchase’

In the interest of customer relations:

a. Ask for proof of identity.

e.g. Drivers Licence, Passport, Credit Cards Pension Card – all of which must be current.

b. Reasons for Refund.

c.   If over agreed value post cheque.

($100 for general merchandise, $50 supermarket)

d. If payment or original purchase was by cheque, do not give a cash refund or any refund until the original cheque has been cleared.

1. Customers must provide in own handwriting:

and complete these questions:

A lot of retailers have now adopted the above procedure.

Many retailers these days will not refund, credit or exchange if there is no proof of purchase.  Some will, if there is no proof of purchase, limit the “refund” to an exchange only.

It is important for retailers to establish a clear and concise refund policy and ensure that all their staff is aware of this policy.

Spare Parts and Refunds

Manufacturers and importers have a legal obligation to ensure that repair facilities and spare parts are reasonably available.  If they don’t, consumers who suffer damage as a result may claim compensation.  This obligation is above and beyond any voluntary warranty placed on goods by the manufacturer.

What is regarded as reasonable will vary depending, for example, on the nature of the product and its expected useful life.

However, after 10 years from the sale of goods to a consumer, a manufacturer or importer is not obliged to maintain spare parts and servicing.

Freight Costs for Repairs

If faulty goods have to be returned to the place where they were bought, any freight costs should be borne by the retailer.  This could be the manufacturer if goods were bought direct from the manufacturer.

Merchantable Quality

If a customer brings back goods because they have a manufacturing fault, the customer IS LEGALLY ENTITLED TO A REFUND.

However, it is sometimes difficult to decide whether something has a basic fault which entitles your customers to a refund.

Customers are NOT entitled to a refund if:

• The fault was caused by them;
• The fault could be expected because of the item’s quality i.e. age and/or price

Example A:

A customer purchases a red shirt, returns it stating that as soon as it was worn the seams came apart at the sleeves.

In this case the customer is entitled to a refund.

You can offer to repair or replace, but if the consumer insists upon their money back, they are legally entitled to same.

Or

The red shirt is brought back again.

This time it is 7 months old.   Has been worn extensively and now the sleeves are coming apart at the seams.  Customer wants a refund.  States goods are faulty.

In this case we don’t believe the goods are faulty,

Because the shirt has been washed and worn extensively and if there was a fault it should have been noticed earlier.

Example B:

A refrigerator is purchased.  18 months later this refrigerator completely breaks down and cannot be repaired. 

In this case the customer would be entitled to a complete refund, credit or exchange.

You could offer a partial refund, as the customer has had some use of the product, but if the customer insists upon a total refund, this is one of those cases where it would be best to totally refund.  Why?  Because one would expect to receive more than 18 months use out of a refrigerator.

If the customer demands a complete refund you have to refund the same way as he/she paid, i.e. by cash or credit card.

If the retailer refunds to a customer a genuine manufacturing fault then the manufacturer, by law, has to refund, credit or replace the refrigerator to the retailer.

Fit for Purpose

It is important that you understand the product you sell and what they do (product knowledge).  Listen carefully to what your customer is requesting to ensure that the product you sell them is fit for purpose.

Example A:

Customer comes to a shop and asks to purchase a piece of equipment to bang a nail into the wall.

Instead of selling the customer a hammer, the retailer sells the customer a screwdriver.  Obviously the screwdriver will not do what the customer wants, that is bang a nail into a wall.

Customer is entitled to a refund.

Example B:

Customer asks for glue to mend a china cup and gets sold wood glue instead.

Again, the customer is entitled to a refund, credit or exchange.

However, if the customer did not ask for any advice or assistance from you or your staff when making any of the above example purchases, the purchase could be seen as an incorrect choice or change of mind purchase and therefore the customer would not be legally entitled to a refund.

Goods Not as Described or Did Not Match Sample

Goods must match any description or sample given to the customer whether face to face, on the labelling or packaging, or in any promotional material.

Example A:

A customer when she gets home discovers that she has received one size 6 shoe and one size 7 shoe when in fact she asked for both shoes in a size 7. 

The customer is entitled to correct size shoes or in this case is entitled to a refund.

Example B:

Customer when in shop asks to purchase navy blue pants.  When she gets home she discovers that they are in fact black. 

She is legally, in this case, entitled to a refund.  The customer asked for the navy pants and was sold black.  She did not receive what she described.

Example C:

Customer places an order for some cushions exactly as the ones she brought in as a sample.  When the order comes in the cushions are not the same.

Could be entitled to a refund.

Goods Sold as Seconds

Where goods are sold as seconds, customers may still be entitled to a refund.   Just by stating that something is a second or broken does not remove the right to a customer receiving a refund.  They cannot claim a refund on the fault that was drawn to their attention at the time of the sale, or if they change their mind about the purchase, but if other faults occur in the product, other than the original fault, they are again entitled to a refund.

Example A:

Say, for instance, a handbag is reduced and sold as a second because it was dirty. 

If the handle of the handbag breaks, within reasonable time of use, then the customer is entitled to a refund. 

The handbag was reduced because it was dirty, not because of a faulty handle.

Example B:

If a lamp and lampshade are sold or reduced because the lampshade is broken and then the customer gets home and finds that the electrics are faulty.

The customer would be entitled to a refund.

You can, of course, decide to refund everyone for whatever reason.  That is purely a business decision.  What you can’t do is refund less than the legislation requires.  Your policy is null and void when compared to the law.