💡 Key insights
- Businesses must give customers refunds when the goods or services fail to meet consumer guarantees under Australian consumer law including being of acceptable quality, fit for purpose and matching their description.
- Refunds are required if a product is defective, unsafe or cannot be repaired within a reasonable time, or if a major failure occurs with services such as poor workmanship.
- A refund obligation also arises when a business’s refund, return or exchange policy promises a refund in specific circumstances and the customer satisfies those conditions.
- Businesses are not obliged to refund simply because a customer changes their mind unless the business has voluntarily adopted a change-of-mind refund policy.
Selling, hiring out or leasing goods and services is the entering into a contract with the consumer. Consumer laws in Australia have provisions to protect consumers in case of unacceptable quality of a product or service. If a business fails to meet its obligations under consumer law, remedies such as refunds can be sought by consumers. Refunding is the repayment of money for goods or services to customers because of their dissatisfaction of that good or service.
What is the Competition and Consumer Act 2010?
Businesses have an obligation to fulfil certain guarantees and warranties in the Competition and Consumer Act 2010 (CCA). Schedule 1 of the Act contains the Australian Consumer Law (ACL) which has a consumer guarantee to acceptable quality of goods. Any business that supplies goods to a consumer needs to comply with this section in order to avoid breaching their duty to their customers.
Acceptable quality means goods are:
- fit for the purpose which goods of that kind are commonly supplied
- acceptable in appearance and finish
- free from defects
- safe, and
- durable.
Goods must also be free from any security, charge or encumbrance and fit for its intended purpose. Goods guarantees do not usually apply to goods obtained through auction.
There is a guarantee that services are undertaken with due care and skill, in a reasonable time, and be reasonably fit for its purpose (including any product resulting from the services).
Repair, Replacement or Refund?
A business can provide a repair, replacement or refund if there is a problem with a product or service. However, consumers are not always entitled to one; remedies only need to be given if a business fails to meet its obligations under the CCA.
The type of remedy available to a consumer is based on whether the fault with the good or service is a minor or major problem. A minor problem with a good or service warrants a free repair from the business. Businesses are obliged to comply with the consumer’s choice between a replacement or refund where there is a major problem with a good. Major problems with a service warrants either compensation for the drop in value of the result of the service, or a refund.
When to Give a Refund
A refund for goods and services doesn’t need to be given in situations where the consumer:
- received what they asked for but later changed their mind
- found the good or service cheaper somewhere else
- doesn’t have proof of purchase
- has damaged the goods
- decided they had no use for it.
However, ACL demands that businesses provide a remedy for goods or services when it:
- doesn’t match the sample or description
- is faulty, whether the customer finds this before or after using the product
- doesn’t do what the business said it would, or
- doesn’t do what the customer asked for.
For further questions on whether a customer of your business is entitled to a refund, contact a consumer lawyer.
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