Refunds and payments
Refund obligations can be placed into two categories – major and minor failures.
You don't have to give a refund when a consumer simply changes their mind about a product, for example if they no longer like it, or they've found it cheaper elsewhere.
Signs that state 'no refunds' or 'no refund on sale items', and 'exchange or credit notes only' are unlawful because they imply it's not possible for consumers to get a refund under any circumstance – even when there's a major problem with a product.
Some main points to remember include:
- If the customer changes their mind, it's up to you whether you provide a refund or not.
- You can never put up a 'no refund' sign
- If it's a major failure, you have to give a refund, replacement or compensation.
- If it's a minor failure, you have to repair, replace or refund.
- You must provide a lay-by statement if you offer it.
- If you charge for credit, you must register with the Business Licensing Authority.
What's considered a major failure?
Under the Australian Consumer Law, when a product or service fails to meet a consumer guarantee, your obligation to provide a type of remedy will depend on whether the failure is major or minor.
A major failure with a product or service is when:
- a reasonable consumer would not have bought the product or acquired the service if they had known about the problem
- the product is significantly different from the description, sample or demonstration model shown to the consumer
- the product or service supplied is substantially unfit for its normal purpose and cannot be made fit within a reasonable time
- the product is unsafe or the service supplied has created an unsafe situation.
When there is a major failure with a product or service, the consumer can choose to:
- give it back or cancel it, and get either a refund or identical replacement
- keep it, and ask for compensation for the fault.
In either circumstance, the consumer can seek compensation for any other reasonably foreseeable loss or damage. To find out what remedies can be provided, read the Australian Consumer Law consumer guarantees guide.
What's considered a minor failure?
A minor failure occurs when a problem with a product can be fixed easily, in a reasonable time and doesn't have the characteristics of a major failure.
You can provide a repair, offer the consumer a refund or an identical replacement (or one of similar value if it is reasonably available).
If you've identified a minor fault, but have not been able to fix it within a reasonable time, the consumer can choose to get the job done elsewhere, and charge you reasonable repair costs.
Alternatively, if the fault cannot be repaired within a reasonable time, or at all, the consumer can choose to reject the product and demand a refund, replacement, or the difference in value.
Businesses must provide a lay-by statement which clearly sets out the terms and conditions of the lay-by transaction, under the Australian Consumer Law (ACL).
- a description of the goods purchased
- a date when payments are due
- any cancellation charges which may be payable
- conditions outlining when each party may cancel the lay-by transaction
- a date when the cancellation charge is payable
- restrictions on such a charge.
You may be providing credit, which is covered by the National Credit Code, if you provide money to purchase goods, services or land; or lease goods.
The Consumer Credit Code applies if:
- you provide the credit as part of any business
- you charge for the credit you provide
- your customers are individuals or residential strata corporations who use it mostly for personal, household or domestic purposes
Specific parts of the Code apply to different types of credit contracts and leases, but they are all covered by the Code's principles of disclosure and fairness in the marketplace. Some examples of transactions covered by the Code include:
- credit cards or hire of goods
- personal loans or overdrafts
- pay-day or housing loans
- related guarantees and mortgages
- continuing credit accounts
Under the Act, credit providers whose activities are regulated by the Code must register with the Consumer Affairs Victoria on their website.