Tips for small businesses post the holiday period: When can a consumer return goods?


Consumer guarantee rights

Consumers have a set of consumer guarantees when purchasing goods or services. These consumer guarantees cannot be avoided by small businesses and should always be kept in mind.

When you have failed to meet a consumer guarantee in relation to goods or services you must:

  • Repair;
  • Replace; or
  • Refund.

Where there is a minor problem with a product, small businesses can choose to give consumers a free repair instead of replacing or refunding the product. Purchasers who get faulty goods fixed elsewhere can pass on repair costs to the business where they originally purchased the goods.

However, where there is a major problem, consumers will have the right to ask for their choice of a replacement or refund. A product will have a major problem where this problem would have stopped someone from buying it, the product is unfit for purpose or it is unsafe.

‘No Refunds’

Signs proclaiming ‘no refunds’ are illegal under the Australian Consumer Law as they imply it is not possible to get refund under any circumstance, even where a fault exists with a product. Remember, consumer guarantees apply to all transactions involving the purchase of goods or services. By displaying a sign like this, you are essentially telling customers that consumers guarantees do not apply to your business. The ACCC can impose strict penalties for misleading customers in this way.

When you must provide a refund

Small businesses will be obliged to provide a refund to a customer who has proof of purchase and a legitimate fault with a product.

You have the right to ask a customer for proof of purchase. However, if the customer can provide evidence that they purchased an item and there is an issue with the product, you may be breaking the law if you deny a refund, replacement or even repair. Having the physical receipt from a purchase is not the only way to prove purchase, other options include:

  • A reference number given for payments via the internet;
  • A bank statement; or
  • A photograph of the receipt.
When you are not required to provide a refund

Where a purchaser simply changes their mind and does not have a legitimate fault with the product, you will not have to refund the product. You will also not be compelled to offer a refund where a customer simply found the goods cheaper elsewhere or has no use for the goods.

If you have an in-store policy to offer a refund, exchange or store credit, you must follow your in-store policy. For example, where a customer buys a pair of shoes that do not fit, whilst they will not automatically be entitled to a refund under the Australian Consumer Law, many stores do still offer refunds in this scenario. This policy should be clearly displayed at the point of sale or on your business’ website.

Store Credit

In the scenario outlined above, where a business is not required to give a customer a refund, it is acceptable to offer store credit as a refund. However, where a business is compelled to provide a refund due to a fault with the product, the purchaser will generally be entitled to receive a refund in the form of their original payment. For example, if they paid for a product with cash, it is reasonable to offer a refund in cash. Insisting that a refund be given in the form of store credit is not enough.

If you would like to discuss your options regarding these tips, or more generally how the Australian Consumer Law applies to your business, please do not hesitate to contact our office.

The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate. Individual circumstances are different and as such, require specific examination. Asparq cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.

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