No refunds policy – what’s new?

27 June 2008

Readers may recall from our bulletin on 15 May 2008, “New Laws to Regulate Sharp Trading Practices – the Consumer Protection from Unfair Trading Regulations 2008” that new consumer protection legislation came into force on 26 May 2008.

The broad principle of this legislation is that retailers and manufacturers should deal with consumers fairly. The Regulations protect consumers by outlawing a host of deceptive and intimidating sales practices which are unfair but had not all been deemed illegal until now.

Under the Regulations, companies are prohibited from misleading consumers about their legal rights. This throws up some interesting examples. Thus, the well known use of a notice or receipt stating “No refunds” is now likely to be deemed in breach of the Regulations.

Although there is no requirement for you to display a returns policy, if you do not have one, if you do offer consumers more than their legal rights (for example, you accept returns where the consumer simply changes their mind about their purchase), then you must display a policy clearly on a notice. However, you must ensure that this notice does not cause any confusion about the consumer’s legal rights.

We all know that should goods fall short of certain standards in any way, then under the Sale of Goods Act, consumers may be entitled to do one or more of the following:

Reject the goods
Claim a refund and /or compensation
Claim a repair / replacement

If instead of leaving customers to rely on their statutory rights you also decide to display a notice setting out your individual returns policy, the way to do this is to explain what you will do, in addition to the consumer’s rights, rather than what you will not do. This way, there is much less chance of inadvertently misleading your customers as to their rights. Such a notice will also have a positive message about the added value offered by your business, which must be good for customer relations and the brand.

In addition, you may decide to set out, in broader terms, what the consumer’s main legal rights are when buying from any retailer.

Businesses should be aware that a notice that is illegal cannot be made compliant simply by stating that “your statutory rights are not affected”. This phrase is considered not to be well understood by consumers and as a result could potentially mislead.

The maximum penalty for a misleading statement about consumers’ rights is an unlimited fine and/or two years imprisonment. This is a strong imperative to get it right! An enforcement authority can also apply for a court order preventing further breaches.

For assistance with your returns policy or more information on the CPRs in general, please contact Fiona Carter or Nina Best.

The content of this bulletin is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.