If you operate an online store, there will inevitably be times when you encounter unsatisfied customers who want a refund for the goods they have purchased.
In these instances, it pays to know when you should issue a refund and when you’re within your rights to withhold reimbursement.
In this post, we look at the key information that you need to know about giving refunds.
The legal framework for refunds
As a business operating in the UK, there are strict rules and regulations relating to refunds and returns that you must adhere to.
The Consumer Rights Act 2015 provides the general legal framework for ensuring consumers are protected. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 outlines the specific rules for businesses involved in ‘distance selling’; this being any business that allows customers to make purchases online, via mail, or over the phone.
As an online store, you are taking part in ‘distance selling’, and as you will see, this impacts the rights of your customers when it comes to refunds.
Refunds when the product isn’t working (or as you described)
Your customer is entitled to a full refund (or replacement, repair, or compensation) if you have:
- Sold them a product that is faulty
- Sold them a product that does not do what it is supposed to do
- Sold them a product that is not as it was described
It does not matter if the product was bought at full price, as part of a sale, or with any kind of discount voucher or code. If the product can be categorised into any of the above, your customer is entitled to a refund, replacement, repair or compensation.
However, there are a couple of scenarios when you do not have to provide a refund:
- If the customer was aware that the product was already faulty
- If the customer attempted to repair the item themselves
If a customer is entitled to reimbursement, the form this takes depends on how quickly the item is returned to you.
Within 30 days of receiving the item
The customer is entitled to a full refund. You can offer a repair or replacement but they can insist on the refund if they wish.
More than 60 days but less than 6 months
The customer is entitled to a repair or replacement. If you are unable to provide either of these, you should issue a full refund.
After 6 months
If the customer can prove to you that an item was faulty when they received it, and you, in turn, agree that it was faulty, you should provide a repair or replacement. If you are unable to provide either of these, you can issue a refund. In this instance, you can issue a partial refund because of the amount of time that the customer had the item.
Refunds when the customer changes their mind
Unfortunately for you, as the owner of an online store (so a distance seller), even if the product that you have sold is in working order, does what it’s supposed to do, and is exactly as you described it – you must still issue a full refund if the customer has had a change of heart and no longer wants the item.
In this scenario, the customer has 14 days from placing the order to let you know that they want a refund. They then have another 14 days to return the item to you. You should then issue a full refund within 14 days of getting the item back.
There are a handful of items that can’t be returned simply because the customer has changed their mind, including custom-made items (or personalised items), sealed medical items, sealed underwear, and perishable items (for example, food). These items can be returned, however, if they are faulty.
Who pays for returning the item?
This is up to you. Some businesses will insist on the customer paying for the return, whilst others will pay for this themselves. What is important though is that the customer is made fully aware of who is taking on this cost. If this is not clear you will immediately be made liable.
Above, we have set out when you must issue a refund (or other form of compensation) and when you are entitled to withhold this.
As a small business owner, where reputation and word-of-mouth are vital to the ongoing success of your operation, you should approach each refund request with care.
If a customer is eligible for a refund, by all means, attempt to offer them a replacement, repair, or credit voucher – but if they insist – give the refund without making the process difficult for them, and remain courteous throughout, particularly if you are dealing with a returning customer.
If a customer is making life tricky for you, remain professional and avoid conflict where possible. There will be times when this means taking the hit and issuing an unwarranted refund.
Do you need a returns policy?
There are two schools of thought regarding returns policies.
You are not required to publish a returns policy on your website, unless your business goes beyond what the law requires. So one opinion is that’s safer from a legal point of view to not publish anything at all.
On the other hand, customers may be suspicious of online sellers who do not publish a returns policy, and so shop around until they find a supplier who does clearly state their rights.
Ultimately it’s up to you. If you wish to include a returns policy on your website, we recommend seeking professional assistance in drafting this.
Thanks for reading
So there you have it, ‘What online store owners need to know about issuing refunds’.
Whilst having to issue refunds is undoubtedly a painful experience for business owners, in a world where online reviews can play such a significant role in the success and failure of a business, being forthcoming with refunds can often be the best strategy for long-term business success.
We hope you have found this post helpful. Please leave a comment if you have any questions.