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How to Deal With Product Refund Requests
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How to Deal With Product Refund Requests

March 5, 2018, 6 Mins Read.
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Getting refund requests is quite common for businesses of all types. But often small businesses don’t have a systematic process for dealing with them. They can be a bit of a hassle, particularly if your online business is new.

In this article, we’ll be discussing the process and how best to deal with product refund requests. This information can be particularly helpful if you’re running a small business and you’re still learning the ropes and getting experience.

This article will go over the following:

  • How to identify if a refund request is valid
  • The consumer laws that your business must follow to avoid refund requests
  • What an express warranty is
  • How to handle a change of mind refund request
  • Steps to follow after you receive a refund request

Criteria for a valid refund request

A consumer can ask for a refund if your product doesn’t meet the consumer guarantees set by the ACL (Australian Consumer Law).

Sometimes repairing the item will suffice. In other cases, the customer may be eligible or may ask for a refund or replacement.

Here are the main criteria for a valid refund request. A consumer is entitled to a refund only if all of these are valid:

1. The price of the purchased product or service must be less than $40,000. Or they must have been bought for domestic or personal purposes

2. The product or service must have violated one or more consumer guarantees (described below)

3. A customer must present a proof of purchase if they want to ask for a refund. Following documents may work as a proof of purchase:

a. A receipt of purchase

b. Tax invoice

c. Credit card statement

4. The product or service has a major problem. A major problem is defined as any of the following:

a. The product or service has an issue that would have stopped the customer from buying it if they knew about it in advance

b. The product or service is different from the description or sample product presented to the customer beforehand

c. The product or service doesn’t meet the specific purpose that it’s supposed to

d. It’s unsafe for the customer to use the product or service

If a product has a minor problem but can’t be repaired within a reasonable time, then it’s considered a major problem.

Consumer guarantees set by the ACL

The Australian Consumer Law (ACL) requires that every business that sells or leases products or services in Australia must comply with a set of consumer guarantees.

So you must ensure that –

  • The product has an engaging description and clear title
  • It has no defects and works as expected
  • It matches the description and the sample model
  • The customer has full right to possess the good. This means no one has the right to take the good away or prevent the customer from using it (unless he breaks any law)
  • The good is free from any hidden charges
  • The good must satisfy any express warranty given by the seller (see details below)

Even if a product has manufacturing defects, you may not refer your customer to the manufacturer to fix the problem.

However, you may seek compensation from the manufacturer or supplier if they provide warranties against defects or extended warranties.

If your business is the manufacturer or supplier of the product or service then you should know that anything written on the packaging can be considered a warranty against defect even if you don’t provide a formal document.

What is an express warranty?

Apart from consumer guarantees set by the ACL and warranties against defects from the manufacturer, your business might provide additional express warranties. An express warranty can be verbal or written.

Here is an example:

Suppose you sell candles and claim to your customer that the burn time of a certain candle will be at least 30 hours. Though this might not be written on the product package, it is considered as an express warranty.

If your product fails to meet any express warranty, your customer can ask for a refund.

To avoid confusion, it’s better to state the conditions of your express warranties clearly. For example: Let your customers know if they need to bring the original packaging when they want to return products under an express warranty.

Remember that an express warranty cannot amend the consumer guarantees set by ACL. For instance, if a customer requests a return due to a manufacturing defect, you cannot ask them for the original packaging.

How to deal with the change of mind refund requests

You are not obliged to provide a refund to a customer if they simply change their mind. For example: If a customer buys a t-shirt and later decides they don’t like that shirt, you may not provide a refund.

But businesses often provide express warranties that honour change of mind refund requests. For example, your software product may have a 7-day money back offer that gives your customers a full refund if they find that your product isn’t a perfect fit for their needs.

So you may choose to have a more liberal refund policy than what is set by the law. This will help increase your business’ reputation and provide better customer service.

Handling a refund request (a step-by-step guide)

It’s natural for any business or e-commerce site to get refund requests. Mishandling such requests may damage your reputation. If you abide by the laws and policies, then there’s no reason to worry about giving or rejecting a refund.

Here is a step-by-step guide that will help you handle refund requests easily:

  • Step 1:
    Understand the complaint of the customer

    When you receive a refund request, try to understand the objections raised by the customer first. This step is crucial. Sit on the email that your customer has sent. Try to understand if their claim is unreasonable. Don’t accept or deny their refund request right away. Identify why they are asking for a refund.
  • Step 2:
    Check if your product has broken any consumer guarantee set by ACL

    Once you have identified the issue, check if it falls under the consumer guarantees set by the ACL. If it does, then you’ll need to give a refund or repair the good.
  • Step 3:
    Check if your product has broken any express warranty set by you

    If the issue mentioned by your customer doesn’t break the ACL rule but an express warranty set by your business, you still need to give a refund or repair service.
  • Step 4:
    Decide if you’ll need to provide a refund or a repair

    If your product has a minor issue you might offer the customer a repair instead of a refund. For major issues or for cases where repairing will take much time, you must go for refunds.
  • Step 5:
    Make sure your customer is satisfied

    For online businesses (or any business in general) customer reviews or word-of-mouth is a crucial factor. So unless your customer’s claim is very unreasonable, it’s better to make sure they are happy regarding how you handle their refund requests. Sometimes you may need to go the extra mile to ensure your customer’s satisfaction.

If a customer is not satisfied with the way you handle the refund request they may report that to ACCC (Australian Competition and Consumer Commission), local tribunal or magistrates court.

Conclusion

When a potential customer visits your online store, you don’t want them to feel hesitant about a purchase. A clear refund or return policy will encourage them to trust you more. It’ll also help you to decide what to do after you get a refund request.

As an online business, you should consider refunds as investments. Your willingness to accept reasonable refund requests will give you more loyal customers in the long run. But if you receive a refund request that is invalid or unreasonable, then you have the full right to decline.

Note:
This article gives an informal presentation of information on handling return requests in Australia. But it should never be taken as a source of legal advice. For accurate legal information please refer to the resources provided by ACCC and Australian Consumer Law.

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