Why now is the time to look at your refund policy

Sometimes getting a refund is a lot trickier than it ought to be. A LOT trickier.

Sometimes a customer is entitled to a refund. Sometimes they’re not.

Sometimes they haven’t got a clue what they’re entitled to.

Different companies have vastly different policies: from ‘no quibble’ guarantees offering the prospect of utter joy and permanent customer euphoria to businesses which say that they provide refunds but will do everything—everything!—in their power to prevent shoppers from returning goods.

I recently spent a tiresome lunch hour trying to get a refund on a waterproof jacket that was more akin to a coat-shaped sponge than an item of outdoor clothing. The raincoat wasn’t cheap and I wasn’t happy. The shop assistant obfuscated, insisting that I could only be offered a handwritten credit note. After 30 minutes of tedious, low level arguing a manager was called. He too laboured under the misapprehension that a credit note was all that I'd get, asserting that his shop could not be held responsible for manufacturing faults.

I wasn’t sure whether the sales team were genuinely ignorant on the law—that, in particular, a customer is entitled to a refund if a product is faulty (even if the defect is not the shop’s fault as such)—or whether they were just being stubborn: they wanted to keep the money within their business.

Lawyers have been aware of these issues for years. The Law Commission recognised in 2012 that,

there may be a need for public enforcement [by consumers] against traders who regularly mislead consumers about their legal rights.

The Commission highlighted that traders which undertook these practices were a problem. It went on to state that this type of behaviour was ‘serious and undesirable’ but, in the end, it thought that:

traders who habitually or intentionally seek to deprive consumers of their legal rights are best dealt with by public enforcement,

In essence, the authorities stood back a wee bit, and despite many forthright statements, decided not to prioritise giving additional redress to consumers at that time as it would have amounted to a ‘major extension of the law’.

Traders shouldn't rest on their laurels though. Consumer law is constantly developing in the EU and the UK. If things don’t improve and businesses believe that they can get away with malpractice the law may well change in the future. What’s more, the authorities still have sanctions that they can impose on miscreant businesses now. Those laws haven’t gone away.

In essence, firms that misbehave may be in breach of the Consumer Protection from Unfair Trading Regulations 2008 and may face action by enforcement authorities. This usually happens because they are using misleading and aggressive commercial practices in a systemic way, such as implementing a policy—whether formal or informal—of only offering a credit note even though a full refund is required of them; or they add unreasonable conditions for consumers to comply with if they want a refund.

So what should businesses do to protect themselves and enjoy a modicum of legal certainty? Should they draft a refunds policy?

If you do, be careful.

To quote many trading standards authorities (in this case, Gloucester County Council):

It can be difficult to draft a returns policy that provides the consumer with useful information, protects your interests and also meets the requirements of the law. For this reason, it is often said that 'the best notice is no notice', and you should not need to state a returns policy at all unless your policy offers the consumer more than their minimum entitlement in law.

For instance, stating that there are ‘no refunds except where goods are faulty’ is illegal.

Why? Quite simply, there may be occasions where a consumer is entitled to a refund not because the goods are faulty but because they haven’t been properly described. Failing to mention that a refund is available in this latter situation is misleading and accordingly a major ‘no-no’.

Equally, don’t think that you can get away with a policy stating:


*your statutory rights are not affected

The asterisked statement (commonly in a font size that is measured in nanometres) is not some magic ‘Get Out of Jail Free’ card. The two statements must read together. Doing so, it could easily be argued that they are misleading (see below for information on ‘statutory rights’) and, of course, misleading = illegal.

So, when working out a refunds policy, it is important to distinguish between:

  1. Where a customer is not entitled to a refund. In this case, a refund may be offered by a business as a gesture of goodwill
  2. Where a customer is entitled to a refund in certain circumstances such as where a product has been sold to them through the Internet—they may be entitled to a full refund during the ‘cooling off’ period, and
  3. Where a customer is entitled to a refund in all circumstances such as where the goods are faulty or not as described

In (1) above a business has more room for manoeuvre and can specify what the refund rules are—within reason. For example, if a customer simply changes their mind they can return the goods if they have the original till receipt, they do so within a certain period and the goods are unused. Even so, it is often useful to specify that this policy is offered in addition to a purchaser’s statutory rights (eg at (2) and (3)). Below is typical wording that you might see in a trader’s terms and conditions to explain what ‘statutory rights’ are and what they mean:

When you buy goods from us under these Terms you have legal rights. These are also known as ‘statutory rights’ as they are derived from laws such as the Sale of Goods Act 1979 (as this Act has been amended from time to time). The law gives you certain legal rights including that the goods are of satisfactory quality, as described, and fit for their purpose. Nothing in these Terms affects these legal rights. Further information on your legal rights can be obtained from your local Citizens’ Advice Bureau (www.citizensadvice.org.uk).

The key is to be meticulous when drafting a policy and then make a big push on training sales staff. They need to understand them and all the nuances of applying them in practice. Many issues in this area appear to arise due to a lack of proper training. Train your staff well and keep your customers happy.

Finally, you should also be aware that the law is changing on 1 October 2014 (see our post from May here). This new law gives consumer new rights of redress: now is the perfect opportunity to check your refund policies and to ensure that your business is ready to deal with these new rights.

Let us know what you think! Use the comments function below or why not tweet us? As always, we look forward to hearing from you.


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