What Should My UK Business Include Within its Refunds Policy?

As a business owner, you know that not all product purchases run smoothly. Some consumers may buy an item only to find that it is different from what they wanted or is broken or faulty. In this case, many may request you to take action to help, whether that be a full refund or a replacement item. This article will explore the benefits a well-drafted refunds policy can offer your business. In particular, it will explore some valuable pieces of the policy wording, so your organisation can ensure any refunds policy protects your business as far as possible.

Benefits of a Refunds Policy

The main benefit is certainty. A well-drafted refunds policy will offer a roadmap to your organisation and your customers in the event of a purchase not going to plan.

There are three main circumstances in which UK customers tend to request refunds:

• they have changed their mind within 14 days of purchase;
• the item is in poor condition (for example, the delivery process dented and scratched the product); or
• the item is faulty or broken, so it does not work correctly.

Your business is only legally required to offer a full refund in some circumstances, not all. So, for example, if a customer reports that the item is faulty or broken, your organisation can seek to repair or replace the item within 30 days. Accordingly, it is only if that is not possible that your business must offer a full refund.

However, some businesses offer full refunds in a broader range of circumstances. This is to safeguard customer loyalty and ensure consumer returns in the future. Accordingly, your refunds policy can depend on your company’s ethos and customer satisfaction standards as much as the law itself.

Let us consider some practical provisions within refund policies below.

1. Confirmation of Full Refund Scenarios

Only some requests for a full refund from a customer should result in one. One of the most vital parts of any refunds policy is confirmation of the scenarios in which a customer will qualify for a full refund.

These tend to include the following situations:

• where the customer changes their mind about the item within the first 14 days, and the original packaging has been retained; and
• the item is damaged and no replacement is available within 30 days of the refund or returns request.

However, some UK businesses will exercise their discretion to allow full refunds in other circumstances (such as a customer complaining that the item was broken upon delivery and any replacement would be insufficient).

It is also best practice to confirm whether you will cover any return shipping cost. Offering free customer returns is a mark of a good return policy in most customers’ eyes.

2. Item Refund or Return Exemptions

Your business can set out some limited exceptions to the right to obtain a replacement or refund.  

One such situation would include a customer damaging the item through their own careless use. For example, suppose the customer spills a hot drink on it. Other examples would be where the return of the item would be unhygienic (for example, a customer trying to return worn undergarments). Alternatively, the customer may dispose of the original packaging for an expensive item.

Where a full refund is not possible, some businesses will still offer an alternative, such as store credit.  This is at the company’s discretion and largely dependent on its customer service ethos.

3. Examples of Item Replacement

Your company may prefer to offer replacement items for faulty goods rather than simply hand out refunds. This is relatively usual and permitted under our consumer law.

It is beneficial to state this fact within your refunds policy. For example, to clarify that any consumer complaining of a defective item will only be offered a full refund if no replacement is available within 30 days.

4. Requirements for Item Return or Refund

Traditionally, many UK consumers wishing to return an item took the defective product back to the retail store they purchased it from. However, today, many purchases occur through company websites.

In this case, it is helpful for your refunds policy to detail the information your company requires to process a refund or return process. Some examples include:

• the need to see photographic (or video) evidence of the item’s flaws;
• a written explanation of the defective nature of the item; and
• confirmation of what the customer is looking for (whether a repair, replacement, refund or store credit).

Key Takeaways

At a time when consumers are tightening their spending, UK companies are experiencing increasingly higher numbers of return and refund requests. For many businesses, it is a case of trying to satisfy customers and offer good levels of customer service whilst limiting full refunds to a level that safeguards profit margins.  One piece of the puzzle includes a reasonable, straightforward Refunds Policy, which your company can refer to in case of any potential customer angst.  

Due to the importance of a well-drafted refunds policy, many business owners turn to expert lawyers to draft a suitable policy that fits the company perfectly.

If you need help putting a refunds policy in place for your UK business, our experienced E-Commerce and Online Business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page. 

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