What? I can’t have a Final Sale – No Refunds Policy? We understand business – we understand that when you make a sale, you want that sale to go to revenue. Unfortunately, the Australian Consumer Law (ACL) does not allow you unilaterally decide the sale is a done deal. In particular, as this Article discusses, you must give your customer the right to a refund. If you refuse that right, the ACL cuts into your revenue line with penalties.
A quick briefer on the Australian Consumer Law (before we discuss refunds and penalties):
The Australian Consumer Law (ACL) is contained within Schedule 2 of the Competition and Consumer Act 2010 (Cth). The ACL contains provisions that aim to provide protection to consumers when purchasing goods and services.
These provisions contain rights of consumers, and obligations of businesses, that are implicit in every contract entered into by a consumer to purchase goods from a supplier. Consumer guarantees include, but are not limited to:
- the goods will be sold with clear title (with no undisclosed securities);
- the goods or services are fit for their intended purpose, or any other purpose identified by the consumer to the seller prior to purchasing the goods;
- the goods will match any sample or demonstration model shown;
- the services will be rendered with due care and skill; and
- the services will be performed within a reasonable time (where no time limit is specified).
If a good or a service fails to meet any of the consumer guarantees, a consumer is provided rights against the seller through the ACL. Depending on the nature of the failure, the consumer has varying remedies against the supplier.
If the failure is classified as a ‘minor failure’, the supplier has the option of choosing between providing the consumer with a repair of the goods, or offering a replacement or a refund. At this level it is the option of the supplier as to which avenue to take, however they are obligated to remedy the failure.
If the failure is a ‘major failure’ the consumer can decide to reject the goods or services and choose a refund or replacement, or ask for the supplier to provide compensation for any loss in value of the goods or services as a result of the failure.
A discussion of the “refund” obligations of a supplier:
Signs in stores or on websites (for online shopping) that state that a business does not offer refunds, or signs that attempt to limit a consumer’s right to redress in circumstances where goods or services fail to comply with a consumer guarantee are unlawful.
Suppliers of goods or services are prohibited from attempting to exclude the applicability of consumer guarantees to avoid obligations under the ACL. Consumers should be aware that their rights exist regardless of the signs or advertisements displayed by the supplier. However, signs that disallow refunds for ‘change of mind’ are lawful as they do not attempt to avoid consumer obligations.
A discussion of the “extended warranties” sold by a supplier:
It is also unlawful for a business to attempt to sell a consumer an extended warranty that provides a consumer with rights that are provided under the ACL. In other words, a consumer cannot attempt to sell a consumer rights that they are already afforded by legislation.
Extended warranties are optional only, and should provide rights above and beyond those already provided by the guarantees under the ACL.
What if I give it a go? What are the penalties imposed by the ACL:
Penalties for providing false or misleading information (i.e. representing to a consumer that they are unable to seek a refund for goods in any circumstance) can be up to $1.1 million for a company or $220,000 for an individual. There are also potential criminal penalties available.
Making an effort to comply with the ACL with regards to refunds not only ensures that your business will not be exposed to penalties for providing false and misleading information, but increases consumer confidence in your business and its practices. Having refund information readily available (such as on your website), and displaying ACL compliant signs at the point of sale, ensures that you are not misleading consumers (even unintentionally) about their rights in regards to consumer guarantees over goods and services.
How do you ensure compliance with the ACL in your business dealings?
We recommend taking steps to ensure compliance with the ACL, and to further ensure that consumers will not be misled into believing that they do not have rights under legislation aimed to protect consumers.
We encourage the implementation of a Refund Policy, which provides restrictions on when a consumer can receive a refund, but also makes them aware of their rights pursuant to the ACL. Having the consumer’s rights, and your obligations, openly available to consumers not only increases their confidence in your business but reduces the chance that a consumer will misunderstand their rights pursuant to the ACL for return of defective products.
Further, it is advisable to have a sign displayed at the point of sale (usually the cash register) that alters consumers to their rights under the consumer guarantees. Such as sign is not compulsory but is recommended for good practice
If you have questions or concerns about your obligations under the ACL, Nautilus Law Group can provide you with advice as to how to develop policies and procedures to ensure compliance with the consumer protection legislation. We welcome you to contact our offices on (07) 5574 3560 or email info@nautiluslaw.com.au. We thank you for considering Nautilus Law Group.
Submitted by: Katrina E. Brown BA JD ATIA TEP SSA
