Is your refund policy ACCC-compliant? A recent review flagged misleading practices that could put your business at risk. Here’s what you need to know.
Refund policies can be a difficult matter for businesses to navigate. On one hand, you don’t want consumers taking advantage of generous returns and refund policies and returning items that cannot be resold if these items would still otherwise be fit for sale.
But you also do not want to receive a notice from the regulator because your company’s refund and returns policy is not considered to be compliant with the Australian Consumer Law (ACL).
The Australian Competition and Consumer Commission (ACCC) recently reviewed more than 2,000 Australian retail websites to assess whether their return policies and terms and conditions complied with the ACL. The review uncovered several practices that could potentially mislead or deceive consumers about their rights to exchange, refund or return products.
Businesses do have flexibility when it comes to offering refunds for change of mind. These are refunds where no consumer law warranties apply – including situations where the goods are not faulty, are fit for the purposes they are advertised for and meet the description provided. In these situations you have more flexibility to set strict timeframes about how long the consumer has to return the goods for a refund or exchange (if this is an option at all), whether the goods must be returned with packaging and excluding sale items. However, you must still be clear about these restrictions when discussing or otherwise advertising your returns policy, and must not mislead customers about how generous such policies are.
However, there is much less flexibility to apply blanket rules where consumer law guarantees are in play. That is why broad statements such as ‘no refunds or returns’ are likely to be non-compliant, as they mislead consumers to think that their mandatory consumer law rights do not apply. If a good is faulty or doesn’t meet the consumer law guarantees then it doesn’t really matter if the good is no longer in its original packaging as the consumer probably didn’t envision the fault when they disposed the packaging. They should also not be required to go through a manufacturer as the retailer is who they dealt with to purchase the product.
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.
Issues identified by the ACCC
The 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”.
If any of the above sounds familiar, it may be time to review your business’ terms or refund policies to avoid potential warnings from the regulator and the risk of penalties.
Recent enforcement actions taken by ACCC
The ACCC has taken enforcement action against several brands for misrepresenting consumer guarantee rights under the ACL. Last year, brands including A&S Labels Pty Ltd (trading as Tiger Mist) and Fitbit LLC faced penalties for misleading consumers about their rights to a refund or replacement for faulty or defective products. Fitbit was fined $11 million for making false, misleading or deceptive representations to 58 consumers in relation to their rights to a refund or replacement in circumstances where the product was faulty.
How can businesses stay compliant?
As retailers, it is vital to regularly review your agreements with manufacturers to ensure you have coverage for faulty goods and 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 consumers about their rights and reviewing other product and marketing material to ensure your claims on warranties and refunds are consistent. Staying on top of current requirements can help your business remain compliant with ACCC refunds and returns and off the regulator’s radar.
By Emily Booth, Special Counsel, Holding Redlich
This article provides general information only and does not constitute legal advice.
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Is your refund policy ACCC-compliant? A recent review flagged misleading practices that could put your business at risk. Here’s what you need to know. Legal, News, return Dynamic Business
