Tis the season… to review your customer returns policy

What does the law say?

The Australian Consumer Law (ACL) is a national law to protect consumers and has an effect on all businesses in Australia. Most relevant to retailers’ customers are the sections of the ACL that guarantee consumer rights when buying goods and services. We will focus on the purchasing of goods (ie clothing, cosmetics, and footwear) when answering common questions raised by our retailer clients in this article.

Where goods do not meet a consumer guarantee under the ACL (eg where goods are not of acceptable quality, or do not match the descriptions made by a salesperson, or on labels and in promotions (including social media platforms)), your customer has the right to ask for a refund, replacement or repair where:

• the goods are under $100,000;
• the goods are over $100,000 and bought for personal or household use; or
• the goods are business vehicles or trailers mainly used to transport goods.

A retailer is not obliged to offer an extended refund or returns policy throughout the festive season.

Do you need to offer a refund to your customer if they are returning an unwanted gift?

The ACL is not designed to protect customers if they are careless or make unreasonable demands. A customer is not entitled to a refund if they change their mind about a gift that they purchased for someone, found an item cheaper online, or received an unwanted gift.

Although not legally required, many stores opt to issue refunds for a change of mind to keep their customers happy and as a gesture of goodwill. Online retailers may request a small price be paid (such as return postage costs), especially with many retailers now cracking down on sustainable practices and encouraging fewer returns.

What proof does your customer need to be entitled to a repair, replacement or refund?

The customer needs to present the receipt or sufficient proof of purchase. This may include a digital receipt, bank statement or handwritten receipt. You are entitled to request for sufficient proof of purchase from your customer.

If your customer is entitled to a refund under the ACL, you must not insist that the customer receive another form of remedy (such as a repair).

Who pays the cost of returns?

If a customer is returning the product due to a change of mind and your policy allows for a return, you can also include a requirement for the customer to pay for any reasonable return costs. However, if they are returning an item because it has breached a statutory condition under the ACL, you must reimburse your customer for any reasonable return costs. A statutory condition is an essential term of the contract, which, if not complied with, may ‘break’ a deal between a retailer and a customer. An example of a statutory condition is that the goods which are purchased must be of merchantable quality.

The customer does not have to return the item in its original packaging, unless this is specifically listed in your returns policy.

Is a ‘No Refunds’ sign in a store at a Christmas or Boxing Day sale illegal?

Sometimes, as a retailer, you might try to limit returns during the festive season by displaying a ‘no refunds’ sign; this is particularly common during the Boxing Day sales.

Signs like this are illegal because they imply that your customer won’t get an appropriate remedy if the product purchased breaches a statutory condition under the ACL.

‘No refund after seven days’ or ‘Exchange or credit note only for return of sale items’ signs are also illegal, for the same reason.

A sign that states ‘No refund for incorrect choice’ or ‘No refund if you change your mind’ are acceptable if they reflect your returns policy.

When considering your festive season returns policy

Ensure you have a clear refund policy in place. A clear returns policy gives confidence to the customer and also ensures that you are protected against any claims that your actions are in breach of the ACL. It is important to make sure that any online returns policies are updated to reflect any changes. Clear signs in store stating the customer return options are also very useful. Any changes to your policy throughout the festive period must still be in accordance with the ACL.

An easy-to-follow returns model. A streamlined refund process complete with clear instructions for returning purchases offers peace of mind and helps combat customer hesitancy. Consider offering collection points and identifying a convenient returns drop-off location which can improve purchase return logistics and reduce retailers’ costs in several ways. Couriers offering large volume pick-ups from one location are quicker and cheaper than retail postage, as well as being more environmentally sustainable as fewer delivery trips are being made.

Train your staff accordingly. Make sure that your staff are aware of any changes in the policy and clearly communicate this to the customer. It is also important that your staff have a support system if they experience any difficulty with a customer. A manager should be available to assist with any disgruntled customers who may not be aware of your return policy.