Consumer law: Returns and refunds (Article)  

Useful for: Retailers to understand where they stand when it comes to returns and refunds, and their customers' rights.  Includes examples of acceptable refund policy and sign wordings.

Consumer law on returns and refunds
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 can't 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 and quality and performance that would be reasonable to expect - bearing in mind the price and the way the goods were described.

-- If the goods don't 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 order.

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

A customer may be offered a repair, an exchange or a credit note rather than a refund BUT it is the customer's choice.

A customer is not entitled to a refund when:

-- There is nothing wrong with the goods, but they have changed their mind.

-- The goods were bought for someone else who simply doesn't want them.

-- The customer knows, or should have known, about any fault when they bought the goods (ie. if they were seconds.)

A customer is NOT entitled to a FULL refund:

 -- When the damage to goods is caused by the customer's negligence.  The supplier is entitled to deduct an amount from any refund.

-- If the customer has used the goods and obtained commercial benefit from the use, the supplier may be entitled to deduct a fair amount from the refund to make up for that benefit.

Retailers need to be aware of the following:

 -- 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 when 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. For example if they paid with a credit card, the refund should be reimbursed to that credit card.

'No Refund' signs
Retailers don't have to use signs which explain 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 font can be considered as misleading, because customers may not see them.

Signs which explain 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 their purchase without having been deemed to be in possession of knowledge of the retailer's refund policy.

There is no point in placing refund policy signs at the Point of Sale - the customer has already made their selection (if not already completed the purchase) and therefore can't be said to have made the purchase in full knowledge of the retailer's 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 don't refund'

A sign which says:

'Please choose carefully as we don't give a refund or credit note' is also illegal as that sign would falsely represent the rights of the 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 (eg. 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  mechanical, electrical or electronic goods are being sold (eg 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, ie. 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 can't expect a refund if they change their mind.  In this case, the following wording could be used:

 'Please choose carefully.  We don't normally give refunds just because you change your mind'.

The following refund policy has been endorsed by both Consumer Affairs (Vic) and the Australian Competition & Consumer Commission:

'Our Refund Policy:

Please choose carefully.

We don't 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.'

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