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Do I have to give a refund?

You have an upset customer and they are demanding a refund.

You’ve tried to explain your position, you’ve referred to your terms, but what do you do?  Ultimately, the law says if you have to give a refund a not.  This blog is to help you guide you through understanding whether you have to give a refund or not.

  1. Understand the exact issue

You need to understand  the customer’s exact problem.  If they aren’t happy, why not, with what aspect?  It is important to be as specific as possible when understanding why the customer wants a refund.

  1. Understand your legal obligations

Forget your terms and conditions for now.  The consumer law says when a refund must be provided.  There are consumer law guarantees that apply to all businesses automatically in Australia.  The guarantees differ between service providers, retailers and manufacturers.  For the purposes of refunds, if you import products from overseas, the importer is considered a manufacturer.  The Australian Competition and Consumer website sets out what the guarantees are that each type of business must satisfy.

  1. Have you breached a consumer law guarantee?

Once you understand the consumer law guarantees, you should figure out if the complaint  relates to a particular guarantee.  If it does, you then need to decide if you have breached that guarantee.  Now, don’t start worrying about refunds yet, if you have breached a consumer law guarantee, you do not have to automatically provide a refund.  The law works in a way that differentiates major breaches from minor breaches and scales the response required.

  1. Is it a minor breach?

If there is a minor breach of a consumer guarantee, the business actually has the choice about what to do.  So while consumers may be demanding refunds and compensation, you might not be obliged to give that outcome.  If there is a minor breach in a guarantee the business can decide on the remedy.  This might be to fix the problem, provide a refund or provide a partial refund.

  1. Is it a major breach?

If there has been a major breach of the consumer law you are required to provide a refund, and if there has been loss or damage suffered as a result of the breach, then you may also be required to pay compensation.

  1. Review your terms and conditions

The consumer law sits behind your terms and conditions and your terms and conditions cannot override these obligations to provide a refund, so at a minimum, you will have to consider what I have said above.  However, you may have terms and conditions that go further than the consumer law, that say you will give refunds when you may not legally have to under  the consumer law.  That is ok, but you have made a legal contract which means you have to provide the refund if you have said you will, even if you didn’t have to to comply with the law.

  1. Peace over principle

Some clients I have worked with have decided to give refunds when they haven’t legally had to, as a commercial decision.  Which is fine, but I strongly recommend you take the time to understand what your legal position is before you engage with the customer about what you legally do or don’t have to do.

I help businesses with this issue all of the time, so please call me for a 30 minute free consultation if you need.

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