You’re walking around in your local shopping centre, ready to snap up a great bargain you can boast to your friends. Your eyes are immediately drawn to the words ‘50% off everything’ plastered on a red poster in white bold font. Your heart starts to beat quickly, and just as you’re about to walk through the automatic sliding doors you’re struck by another sign. Lo and behold, a ‘No refunds on sale items’ sign appeared. To your amazement you don’t remember ever seeing that sign before, nor do you remember reading it in the company’s return policy. You decide to walk on by in dismay and think to yourself, is it illegal for a store not to accept refunds on sale items?

Breaking The Law With A Poorly Written Sign

A lot of shoppers experience the familiar feeling of uncertainty when they reach the checkout line of a store that does not offer refunds. The Australian Competition and Consumer Commission (ACCC) is well aware of non-complying stores after inspecting 120 businesses that had messaging about refunds on signs, invoices and receipts. This prompted the ACCC to publish in the Australian Consumer Law (ACL) signs that state ‘No refunds’ are unlawful, including ‘No refunds on sale items’ and ‘Exchange or credit note for the return of sale items’. But why are these signs illegal?

If you’re interested in learning more about consumers’ rights, check out the ACCC’s website.

Background

It is estimated 20 per cent of 561 businesses across NSW were found with illegal ‘No refund’ signs by consumer protection officers. The rise of offending traders, particularly near special holidays, such as Christmas and Boxing Day, has prompted the ACCC to urge retailers to drop ‘No refund signs’. Under the ACL, customers are entitled to a refund, repair or exchange if an item is damaged or not fit for purpose. It is unacceptable for a business to set their own policies that restrict and exclude these rights, which is why ‘No refund’ signs are illegal. The ACL sets out consumer rights that are called consumer guarantees. Consumer guarantees are a set of rules that apply to goods and services by consumers under the ACL. They are viewed as “protections” that ensure accountability and customer satisfaction.

What do businesses guarantee?

When businesses sell goods, they guarantee the goods:

  1. Are an acceptable quality;
  2. Are fit for purpose;
  3. Are accurately described;
  4. Match any sample or demonstration model;
  5. Satisfy any express warranty;
  6. Have clear title. If not, then informed the consumer before the sale;
  7. Are free from hidden securities or charges;
  8. Have spare parts and repair facilities reasonably available for a reasonable period of time.

If a business breaches any of the consumer guarantees, then it is required to provide the consumer a remedy. These rights cannot be excluded by a business’ terms and conditions of sale.

For more information on consumer guarantees, check out our previous guide.

Why Are ‘No Refund’ Signs Illegal?

Ultimately, business owners who display any sort of sign that infers purchasers do not have the right to a refund can be prosecuted by law because they are misrepresenting rights available to consumers. It is interpreted to suggest specific conditions apply to all refund and exchange rights when the conditions are not applicable under the ACL.

In 2016, the ACCC brought proceedings against a Harvey Norman franchisee who was ordered by the Federal Court to pay $52,000 in penalties for making false or misleading representations regarding consumer guarantee rights. The ACCC Acting Chair Dr Michael Schaper said in a media release “this penalty is a timely reminder to all businesses, whether large or small, that they must not mislead customers about consumer guarantee rights under the ACL.”

But this does not mean business owners are prohibited from refusing refunds. In fact, the ACCC has made clear signs that state ‘No refunds will be given if you have simply changed your mind’ are acceptable. Otherwise, if customers purchases a faulty product from a store with a “No refund” policy, and the store manager refuses to offer a refund, then customers can report the store to the NSW Department of Fair Trading. Normally, the Department will take action by imposing substantial fines.

If you’re a business owner who is currently reviewing your store’s terms and conditions, you need to be wary that consumer guarantees apply to all purchases, including sale items.

No matter how long your business has operated, it is always a good idea to have a business lawyer help you understand your obligations, and review your business’ terms and conditions so it is compliant with the law.

Final Thoughts

“No Refund” signs are illegal and a trap that shoppers need to be aware of during End of Financial Year Sales (EOFY). When customers purchase goods that are faulty or below the minimum standard of quality, they have a right under the law, even if they were bought during a sale. Businesses cannot tell customers they do not accept refunds simply because the item is on sale or for any other reason that excludes the ACL.

Let us know your thoughts on stores that offer no refunds by tagging us at #lawpath or @lawpath.

Fiona Lu

Fiona is a Paralegal working in our content team which aims to provide free legal guides to facilitate public access to legal resources. With an interest in information, media, consumer and employment law, her primary focus is on how technology will affect the future of the legal industry.