A customer may return goods if the item is faulty, they found a cheaper one somewhere else or maybe they just changed their mind. Under the Australian Consumer Law (ACL), there are number of consumer guarantees that entitle a consumer to return a product and obtain a refund or replacement. However, there are other reasons a consumer may return goods, and you are not obligated to refund them.

Below, we set out some situations where your business must refund, replace or repair goods as well as circumstances that excuse you from doing so. 

Refund Policy

It is unlawful to have a sign in your store stating “No Refunds”. It is also unlawful to have signs that tell your customers there are no refunds on sale items or that sale items can only be exchanged or given store credit.

However, your business can have a sign stating that you will not refund sale items for a change of mind. You can also limit the period in which change of mind returns are allowed. For example, no longer than seven days.

When You Must Provide the Consumer With a Remedy

The item is faulty

The consumer guarantees under the ACL allow the consumer to have faulty goods refunded, repaired or replaced. A faulty item: 

  • Doesn’t do what it needs to do, or
  • Has a defect, or
  • Is unsafe, or
  • Isn’t durable.

However, if you have disclosed the defect to the consumer, they are not entitled to be remedied once they have purchased the item. Similarly, if the customer uses the goods incorrectly, they will not be able to claim that the goods are faulty.

You will still have to accept the goods back if the consumer only found out that the item was faulty after purchase. This is the case even if they have used the goods or worn them, and removed the packaging or labels.

The item is not the same as the sample or it doesn’t match the description

If the customer purchased the item based on a sample or demo and the goods turn out differently, you must allow them to return the goods and provide a refund.

Similarly, if the product is different from the description presented in advertisements or online, you will need to give the customer a refund. Usually, the product and the description would have to be so different that the customer would not have purchased it otherwise.

The goods don’t do what the salesperson said they would

If a salesperson tells the customer that the goods will do something, they are effectively making a warranty that is covered under the ACL.

If the customer asked your salesperson for a product to do a particular thing and they relied on your salesperson’s advice, the customer will be entitled to a refund.

When You Do Not Have to Refund the Consumer

The customer changed their mind

You do not have to provide the customer with a refund if they simply change their mind. Many stores still have this option and may offer store credit or exchange instead of refunding the items.

The customer does not have a receipt

You are not required to refund goods if the customer does not have a receipt or is unable to show proof of purchase. If they don’t have a receipt, they could show their credit card statement or a lay-by agreement, or a confirmation or receipt number if it was an online purchase.

When it Depends

The customer was given the item as a gift

A customer receiving the item as a gift has the same rights as the person who bought the goods.

The customer bought the item on sale

The ACL views sale and full-price items as the same. You will need to refund sale items in the same situations that you would have to refund full-price items.

You would not have to refund a sale item if you discounted the item because it was defective. 

A secondhand store

If your business sells secondhand goods, they are still covered by the ACL and the consumer guarantees apply.

The item was bought online

Customers who buy items online have the same rights as consumers who purchase in-store.

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Questions? Get in touch with LegalVision’s consumer lawyers on 1300 544 755.

Dhanu Eliezer

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