Repairs, replacements and refunds – know your obligations
It’s important to know your obligations when dealing with customers, particularly when it comes to the return of goods.
As a business owner, did you know you must, by law, guarantee the products or services you sell?
And that your customers have the right to ask for a repair, replacement or refund if the products you sell are faulty, unsafe or don’t work as intended?
These rights are called consumer guarantees and they exist under the Australian Consumer Law (ACL).
But it’s more than just an obligation. Australian businesses experience significant costs every year to deal with problems where they are legally obliged to provide a remedy for consumers. The spin-off effects can include declining sales, a drop in return business and damage to your company’s reputation.
So it’s in your interests to understand and comply with this law, and to have in place a reliable system to manage complaints about faulty or unsatisfactory goods.
What are consumer guarantees?
Broadly, consumer guarantees state that all goods sold in Australia must be of acceptable quality, be fit for the purpose they are intended and match the description given.
Repair facilities and spare parts must be available for a reasonable time, and suppliers and manufacturers must comply with any warranty covering the product.
Services must be delivered with due care and skill, and completed within a reasonable time if no set timeframe is agreed.
The key part of the provisions requires businesses that sell, lease, make or import most household, personal, automotive products and services to provide appropriate remedies for anything that does not meet the consumer guarantees. That includes repairing or replacing the product, providing a refund or fixing the problem with the service.
Consumers have this right whether or not the product or service comes with a voluntary manufacturer’s warranty or an extended warranty. It’s also important to note that manufacturers’ warranties and extended warranties apply in addition to, but do not replace, consumer guarantees.
Resolving problems
If the goods or services don’t meet the consumer guarantees, the most appropriate way to resolve it will depend on how serious the problem is.
If it is major or cannot be fixed in a reasonable time, the consumer is entitled to choose a refund or a replacement product (or receive compensation in the case of services).
A major problem with a product is when it:
- has a problem that would have stopped the consumer from buying it if they had known about it
- is unsafe
- is significantly different from the sample or description
- doesn’t do what you said it would or what the consumer asked for.
The consumer may also be able to claim compensation for any drop in value from the price they paid, or other loss or damage caused by the faulty product.
If it is not a major problem you can choose whether you will repair, replace or refund the product or fix the problem with the service.
In some cases the manufacturer or supplier may be in a better position than you to determine what is wrong with the goods. While the customer is free to seek a remedy from the manufacturer, you can’t demand that they deal directly with the manufacturer.
Also, you must provide a remedy within a reasonable time, so if you have sent goods away for diagnosis or repair, you should have a process in place to follow it up.
If it is a problem that can’t be easily fixed, you should advise the customer and let them choose the preferred remedy.
Consumer rights are limited
Consumer rights are not unlimited, though. For example, you are not required to provide a remedy if the consumer has changed their mind about the product or misused or damaged it.
You can’t limit or refuse a consumer guarantee, nor can you tell your customers they have to pay for the rights under consumer guarantees or do anything that leads them to believe their rights do not apply.
An example is displaying ‘no refunds’ signs. Signs such as ‘No refund on sale items’ and ‘No refunds after 30 days’ imply it is impossible to get a refund under any circumstance – even when there is a major problem with the good or service. This is not the case.
The ACCC has released a free online education program for small businesses to help you learn about your rights and obligations under the Competition and Consumer Act 2010 (CCA), which includes the ACL.
The program is a simple, interactive learning resource that provides a broad overview of the key provisions of the CCA. It includes 10 modules covering topics such as consumer rights, advertising, selling safe products, pricing, unlawful competition and scams.
The free online education program for small business: www.ccaeducationprograms.org
Further information on the ACCC website www.accc.gov.au or call the ACCC Infocentre on 1300 302 502.
