When you return the shorts that didn’t fit, the phone that broke, or even the TV because you changed your mind about the purchase – as consumers, we have come to expect a refund (or at least an exchange).

But when you change your travel plans or miss your flight, we assume that the money is lost. What most consumers don’t realise is that blanket “no refund” policies are illegal. Just because it is in the fine print does not mean you cannot enforce your rights under Australia’s consumer laws.

Last year, consumer advocacy group, CHOICE, lodged a “super complaint” with the Australian Competition and Consumer Commission (ACCC) to shed light on Australian airlines’ refund policies. As a result, the ACCC are focusing on the airline industry to ensure that all Australian airlines are complying with the consumer guarantees.

CHOICE Sheds Light On The Aussie Airlines

Too many Australian consumers experience exorbitant fees for flight changes or cancellations, and last year, CHOICE took action to stand up for consumers’ rights. Four major national airlines were the subject of CHOICE’s “super complaint”, alleging that these airlines may have breached the Australian Consumer Law (ACL). According to CHOICE, a “super complaint” is a mechanism the advocacy group uses when it identifies a large number of concerns and complaints in an industry.

Australian businesses are prohibited from making blanket “no refund” claims, yet such claims are commonplace across the airlines, along with sky-high cancellation fees. Not only do the airlines apply these rules to customers who have a change of mind, but the same policies apply when the delay or cancellation is at the airline’s fault. On top of all of this, customers are expected to read through all the terms and conditions within the 10-minute window before their purchase “times out”.

No-Refund? No Way!

As a consumer, you have certain rights in relation to purchasing goods or services. For any business supplying goods or services, you are required to comply with the ACL, which includes various consumer guarantees. For the supply of services, such as an airline providing a travel service, the following guarantees apply to consumers:

  • that the airline will render the service with due care and skill;
  • that the service will be reasonably fit for the purpose described;
  • that the airline will supply the service within a reasonable time.

The guarantees under the ACL exist separate from contract law. Therefore, ‘no refund’ policies are prohibited, regardless of how many times an airline displays a ‘no refund’ message throughout the online purchase process.

The ACL does not require businesses to offer refunds for a change of mind. However, a business cannot indicate to customers that it will not provide a refund under any circumstance. For instance, the following signs are unlawful:

  •    no refunds;
  •    no refunds on sale items;
  •    exchange or credit note only for the return of sale items.

Airlines Dodging Consumer Laws

Businesses may attempt to side-step the consumer laws in many different ways. The CHOICE “super complaint” encourages the ACCC to shed light on the some potentially murky activities from the airlines.

1. Charging Exorbitant Cancellation Fees

The ACCC guide, “Travel & accommodation – an industry guide to the Australian Consumer Law”, provides that businesses’ cancellation fees should reflect their reasonable costs incurred as a result of the cancellation. 

Excessive cancellation fees may be regarded as a penalty or unfair contract term, which a business cannot enforce. The ACCC suggests the amount claimed should cover the costs the business incurred for cancellations.

Nevertheless, CHOICE has exposed airlines for charging cancellation fees of up to $550 per ticket – or in some cases, up to 40% of the ticket price, which CHOICE claims goes beyond reasonable expenses.

2. Including Confusing and Lengthy Terms and Conditions

The ACCC specifies that terms and conditions for online bookings must be “easily available and identifiable”. Failure to clearly communicate the terms and conditions could be considered unfair and a breach of the ACL.

As part of its complaint, CHOICE argued that the airlines failed to provide customers with adequate time to read through the booking terms and conditions. For example, one airline’s booking page was found to time-out after 10 minutes of inactivity, when it takes the average person more than 50 minutes to read through their 13,000-word contract. Similarly, another airline’s booking page times out after 20 minutes, despite the contract taking 43 minutes to read on average.

On a good day, people find it difficult and confusing to read terms and conditions – being timed out after 10 or 20 minutes makes it nearly impossible. Therefore, although the airlines provided their terms, they may not be what the ACCC would call “easily available and identifiable”.

3. ACCC’s Focus Areas for 2017

As a result of the “super complaint”, the ACCC as part of their 2017 bucket list is focusing on the consumer guarantees that the airline industry should provide. The ACCC will be investigating the limitations on refunds, delays and cancellations on certain inflexible fares for flights.

Key Takeaways

All businesses have a responsibility to ensure that they comply with the consumer guarantees and to be honest and transparent in their dealings with customers. However, it’s important that consumers are aware of and exercise their rights under the ACL where the airline delivers a service in a way that is below the expected standard. If you have any questions about complying with the ACL or enforcing your rights, get in touch with our specialist consumer lawyers on 1300 544 755.

Alexandra Shaw
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