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When selling goods or services to your customers, you will likely come across times when customers ask for a refund. In some situations, the law will require you to give them a refund. In other instances, however, it is up to your discretion. If a customer has reconsidered a purchase and wants a change of mind refund, it is up to you whether you give them one. This article will explain when you do not have to give customers a refund and when you do.

Do I Legally Have to Give a Customer a Refund if They Change Their Mind?

There are certain situations where the law states that you have to give a customer a remedy for their issue or complaint, including refunds. If a customer’s complaint falls outside of these circumstances, however, then the law does not require you to give them a refund or another kind of remedy. Such times are when a customer:

  • changes their mind about their purchase;
  • misuses the product or does not follow instructions explaining how to use it properly, and the product breaks;
  • modifies or alters the item in some way;
  • gets someone else to fix your product before coming back to you;
  • breaks, damages, or disposes of your product after delivery; or
  • buys a faulty product, knowing that the product was faulty at the time of purchase.

If a customer decides to go with a different option while you are fulfilling a service, you do not have to give them a refund.

For example, say you are in the middle of fixing a customer’s car when they decide to go with a cheaper mechanic. You do not have to give them a refund for the work you have already done, because they changed their mind.

Exceptions

Sometimes, the nature of a contract means that customers are entitled to a “cooling-off period” to cancel a contract if they change their mind. You would then have to give them a refund for what they have already paid. These kinds of cases include:

  • lay-by sales;
  • credit contracts;
  • door-to-door sales; and
  • unsolicited products or services.

When Do I Have to Give Customers a Refund?

You have to give customers a remedy of some sort when you break one of your consumer guarantees. These consumer guarantees are set out below.

Products

Services

Your consumer products must:

  • be of acceptable quality;
  • be fit for purpose;
  • match the description, demonstrations, or photos you provide; 
  • be delivered on time and in good condition;
  • have relevant spare parts or repair facilities available if the customer needs;
  • be sold at a reasonable price, if there is no set price already; and
  • be sold legally.

Your consumer services must be:

  • fit for their intended purpose;
  • carried out with appropriate and reasonable care and skill;
  • reasonably priced when you do not provide a set price; and
  • finished within a reasonable time frame if you do not specify a time period.

If you do not fulfil one of these consumer guarantees, you have to give your customer a remedy. This would be either a:

  • replacement;
  • repair; or
  • refund.

If the problem with the good or service you provided was minor, then you get to choose what kind of remedy you give. But if it was a serious problem, the customer gets to decide. So if they ask for a refund, in this case, you must provide them with one. 

It is illegal to put a sign up in your business that says “No refunds.”

Your Discretion to Give a Refund

You could operate your business’ refund policy at the legal minimum, only giving refunds to a customer if there was a problem with the product or service you provided. But you have the discretion to tailor your refunds policy to suit your business, as long as you offer this legal minimum.

For example, the law does not require you to give your customer a refund if they change their mind, but it may be an effective way to generate customer goodwill if you do. Customers may be more inclined to purchase goods or services from a business where they know they can change their mind and get their money back.

No matter what you decide, it is a good idea to create a refunds policy, so that customers know what their options are when they buy from you.

Key Takeaways

If a customer changes their mind and wants a refund for a good or service you provided, you can refuse to give them one. But, you cannot refuse to give a customer a remedy if there was a legitimate fault with that product or service. You may also decide to give customers a refund anyway if they change their minds, which can generate customer goodwill. If you would like guidance around your business’ refund policy, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can I refuse to give customers a refund?

If a customer comes to you with a genuine fault in your good or service, you cannot outright refuse to give them a remedy. If a problem is minor, you can decide whether that remedy is a repair, replacement or refund.

When do I have to give a customer a refund?

You have to give a customer a refund if they find a genuine fault with your goods or service (or you break one of your consumer guarantees in some other way) and the fault is serious. In this case, they get to decide whether they get a repair, replacement or refund as their remedy.

Do I have to give a customer a refund if they change their mind?

Under the law, you do not need to give a customer a refund if they change their mind. However, you may do so anyway if it suits your business, as doing so can generate customer goodwill.

Do I need proof of purchase for a refund?

If you are trying to get a refund, then you should provide some proof of purchase, such as a receipt. This way the store or business you purchased from can confirm your purchase.

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