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As a business selling your goods to customers, it can be a hassle when customers come back wanting to return or exchange a product they bought. This means a potential loss for your business and an unhappy customer. However, you do have certain legal obligations around refunds and exchanges and when customers are entitled to them. Customers will also appreciate a business that handles their problem with courtesy and professionalism through a fair returns policy. This article will explain some of your obligations when customers buy products and when customers may be eligible for a refund or exchange.

Upholding Guarantees

If your business provides consumer goods or services, you must maintain certain guarantees when selling these to the general public. Consumer goods or services are things that a consumer would buy for everyday personal or household use, such as a coffee maker or candles from your homeware store.

The Consumer Guarantees Act implies consumer guarantees on these goods and services so that consumers receive proper value for their money and that businesses maintain quality consumer standards. For your business, you guarantee that your goods:

  • are delivered on time and in good condition;
  • are fit for purpose;
  • match their description;
  • are of acceptable quality;
  • have means of repair or replacement available;
  • are priced reasonably where there is not predetermined value; and
  • are sold legally.

Customer Refund Eligibility

If you break one of these consumer guarantees, then you must give a customer a remedy, such as a:

  • replacement;
  • repair; or
  • refund.

If a customer is eligible, you must give them a refund or exchange as an appropriate remedy. You are not meeting your consumer law obligations if you fail to do so.

If a customer wants to return a product with a minor, fixable issue, then you get to decide how you remedy the problem, such as repairing the product. However, in the case of a significant issue like it being unsafe, the customer has the choice of remedy.

Sale and Clearance Items

Note that if a customer comes to you with a faulty product or a different broken guarantee, you must provide them with a remedy. This is regardless of whether you sold the item at a discounted price or on a clearance rack. If the customer did not know about a fault in a sale item when they bought it, you still owe them a remedy.

Do not mislead customers about this fact, especially in your refund policy. Otherwise, you could face significant legal penalties.

When Is a Customer Not Eligible for a Refund?

Outside of the previously mentioned cases, you are not obligated to give a customer a return or exchange. Such situations may include third party damage to the product or the customer:

  • changing their mind;
  • ordering the wrong size or colour;
  • damaging the product themselves;
  • misusing the product and causing the fault; or
  • knowing about the defect at purchase.

You still have to listen to their complaint or issue and give it due consideration. Make sure to conduct an adequate investigation, and do not delay hearing the complaint. 

If you find after your investigation that there is no fault or other broken consumer guarantee, in most cases, the law would not require you to give a remedy. 

Your Discretion

Nevertheless, you may decide that you will allow refunds or exchanges in some of these situations as a part of your store’s policy.

For example, you may not give refunds outright for a change of mind, but you may give a customer store credit for the value of the returned item. 

Depending on the nature of the product you sell, customer mistakes or changes of mind may be quite common. So, you may decide to offer easy refunds for changes of mind. The law does not require you to, but customers may prefer a business with these options. 

However, this depends on your business’ circumstances and whether it can handle such a process with its finances. Be sure to consider the context carefully and the kind of customer service you want to provide.

Key Takeaways

The law requires that you make certain promises about the quality and handling of your products to your customers. These promises are known as consumer guarantees. If you fail to meet one of these guarantees, a customer is then eligible for a remedy, such as a refund or exchange. You may decide to give refunds or exchanges in other situations as well, such as when a customer changes their mind. Whatever your decision, outline it in a refund and exchange policy so that your customers know their options. If you would like more information or help with refunds and exchanges at your business, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570, or fill out the form on this page.

Frequently Asked Questions

What is a remedy?

A remedy is what you need to offer customers if something has gone wrong with a consumer good or service you provide. It would be a replacement, repair, or refund.

When do I have to provide a remedy?

If you sell consumer goods and services and you do not uphold one of their associated consumer guarantees, then you must give a customer a remedy. Otherwise, you could face legal penalties.

Do I get to choose the kind of remedy my business offers?

You can choose the kind of remedy you give if the problem with your product or service was minor and easily fixable. If it is a significant fault, the affected customer gets to choose.

Can my business refuse to give a refund?

If a customer comes to you with a faulty product or other issue related to their consumer guarantees, then you cannot refuse to give a refund. However, if they want a refund just because they changed their mind, you can refuse.

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