Whether your business is a thriving fashion label or an innovative software service, there can be costly repercussions if your refunds policy or refunds clause is found to be misleading or deceptive under the Australian Consumer Law (ACL).
The ACL provides consumers statutory rights called ‘consumer guarantees’. Consumer guarantees are mandatory which means that anyone supplying goods or services to consumers must provide these guarantees. In 2016, the Australian Competition and Consumer Commission received over 20,000 complaints from consumers relating to consumer guarantees. Many of these complaints involved businesses refusing to refund or provide replacement goods or services to consumers.
The Consumer Guarantees
So, what are the consumer guarantees?
In very simply terms, the consumer guarantees are a promise to consumers that goods or services are of an acceptable standard and quality and match their description. The consumer guarantees require a supplier to refund, replace or re-provide goods or services if they are not of an acceptable standard or quality or have been misrepresented or mis-described.
What is acceptable quality?
Many consumer complaints relate to the guarantee that goods will be of acceptable quality. Acceptable quality means that goods are safe to use, free of defects andsuitable for any uses for which goods of that type are ordinarily used.
Other consumer guarantees relating to the quality, standard or nature of goods include guarantees that goods will:
– match the description of the goods at the point of sale, (including any descriptions given by a sales person), on packaging, or product information on a website; and
– match any sample or demonstration model provided.
Similar consumer guarantees exist for services, including the guarantee that services will be provided with acceptable care and skill or technical knowledge. The service provider must also take all necessary steps to avoid loss or damage when providing the services.
Under the ACL it is an offence to mislead consumers about their rights created under the consumer guarantees. Suppliers must be particularly careful to ensure that refund policies or clauses do not mislead consumers about their rights to a refund, or replacement.
Penalties for contravening the ACL can vary. Two recent examples in relation to consumer guarantees are below.
– Valve Corporation, the US owners of video game streaming service Steam, was ordered to pay $3 million by the Federal Court for stating in its subscription terms and conditions that all payments were non-refundable. The Federal Court held that the terms and conditions were misleading to consumers about the their rights under the ACL.
– Ozsale Pty Ltd was penalised $10,800 for falsely representing that Ozsale, not the consumer, could choose between providing a refund, repair or replacement for faulty goods.
Quick tips for refund policies
Suppliers of goods and services should consider engaging a lawyer to review returns policy or terms and conditions to ensure compliance with the law.
Below are some quick tips to avoid common mistakes in refund policies.
1. Do not state that no refunds are provided on sale items.
2. Do not place a time limit on when faulty goods can be returned.
3. If the goods or services provided have a major fault or malfunction, the consumer must be allowed to choose between a refund, repair or replacement.
4. If the goods have a minor fault or malfunction, you may attempt to repair the goods, before providing a refund or replacement. If they are irreparable, the fault or malfunction is usually major (go back to point 3).
For more information please contact:
Omid Komeili (Lawyer)
0451 395 702
Demetrio Zema (Director)
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