Many businesses have found that in recent weeks customers have been cancelling orders or reservations in droves. Even if your business is still operating, you may have found that customer demand has sharply decreased. Whether your business operates in the travel, events, hospitality or recreation industries, you should always ensure your policies align with ACCC requirements. Here, we’ll provide some guidance on how your business should handle cancellations due to COVID-19.
Check your terms and conditions
It’s worth re-reading your business’s terms and conditions and compare them with guarantees provided by the ACCC. Even if your business’s terms don’t provide for cancellations due to pandemics, this may contravene consumer guarantees. It may also be wise to update your terms and conditions to accurately reflect national standards. In most cases, customers should be able to receive a refund or credit for cancellations.
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Be careful not to mislead your customers
As with all customer interactions you have, you should be careful not to mislead your customers. This is particularly important when it comes to refunds and cancellations. Businesses can be penalised by the ACCC for misleading customers. This includes where you falsely lead customers to believe consumer guarantees don’t apply.
When do I have to provide a refund?
If you ceased operations before Government restrictions
Generally, businesses which have ceased operations of their own accord and prior to Government restrictions have to provide refunds. This mostly includes large-scale events such as music festivals, but some flights may also be included.
If your business closed due to Government restrictions
Businesses which have only closed due to Government restrictions (such as stadiums, Airline or pubs) are not legally required to provide refunds. Despite this, it is still a good idea to provide a remedy to your customers who have had to cancel their booking. This may be by way of providing a credit or voucher, or postponing the event to a later time and offering a refund if your customer cannot attend. It’s important to be mindful that consumer confidence is low at the moment, and you’ll want these customers to return once your business is up and running again.
Services businesses
You cannot charge a customer for a service you can no longer provide. For service-based businesses such as gyms, you must cease collecting membership fees whilst you are closed. This also applies to subscription services which are no longer operating.
Deposits
If your business has collected a deposit for an event, product or service you can no longer provide, generally you have to refund it. However, this doesn’t apply to businesses which have closed due to Government restrictions. Further, you can hold on to the deposit if your business has already incurred costs for providing the service.
Contractual remedies
If your business provides a service, your customer may be entitled to damages if the contract has not been performed. For example, if your construction business has signed a contract to build a house, work may stop due to social distancing rules. If your customer has already paid for some of the work which is yet to be done, they may be able to recover this. However, many contracts include a force majeure clause which accounts for unforeseen events. This will allow your contract to resume at a later date.
Unconscionable conduct
Unconscionable conduct is a broad term that can apply in many circumstances. Businesses can be both the victims and perpetrators of unconscionable conduct. This is generally defined as behaviour which is unfair, unreasonable and unethical. When dealing with your customers, always act in good faith and be careful not to pressure your customers into retaining their order and always handle cancellations professionally. If your customer has signed a contract, make sure you observe any cooling off periods which apply and give them the opportunity to seek professional advice.
Keep in touch with your customers
How you handle cancellations will tell your customers a lot about what kind of business you are. Just because a customer may have cancelled an order now, that doesn’t mean they won’t return in the future. Keep your customers front of mind, and let them know you’ll be open for business once the crisis is over. Many businesses have contacted their customers to inform them what their policies are in response to the COVID-19 pandemic. Doing this will encourage customer confidence and loyalty by showing them that you’re taking proactive steps to look after their interests. Further, you should display the relevant information on your website (such as whether your business is closed).
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