Three Key Points Your eCommerce Business Needs to Know About Credit Card Refunds

When you run an eCommerce business, there will be times when your online customers request a refund for product returns. Your customers may request a return and refund if they are not satisfied with the product or had a poor experience using the product. The refund process can be initiated for credit card payments through the card issuer, such as the credit card company or the issuing bank. As an online business, you need to comply with relevant regulations around refunds. This article explains three key points your eCommerce business needs to know about credit card refunds. 

1. Refunds for Customers

As an online business, you are a distance seller, so when your customers want to get a refund, you are legally obliged to do so under specific rules. This applies also when they purchase by credit card. The Consumer Contracts Regulations says that eCommerce customers have 14 days:

• to change their mind about what they bought from you; and
• after they do so to return the item they purchased. 

It does not matter what the reason is for your online customer’s refund request. It could simply be that they changed their mind. However, rules differ when it comes to:

• personalised items;
• perishable purchases, such as food and flowers;
• sealed items which your eCommerce customer has opened, such as DVDs;
• items which date, such as magazines;
• tickets for events;
• betting and gambling products or services; and 
• digital goods

2. Credit Card Purchases & Extra Protection

When your eCommerce customers purchase from your online store using credit cards, a key point to understand is that they have extra protection in terms of credit card refunds from your online brand. The law states that consumers can get a credit card refund from their credit card provider. This is where the product price is anything from £100 to £30,000. This is known as a Section 75 claim, and it applies if, for example:

• you do not deliver the product to your online customer; or
• your business goes bust. 

Your online customers can do this even if only part of their purchase was with their credit card. However, unlike the general refund rules for distance sellers, where it does not matter what the reason for the refund is, it does with the claim described above. Your customer can only get a credit card refund this way where their reasons are:

• breach of contract, which is where you do not stick to what you agreed when they bought the product, such as giving the wrong description; or
• misrepresentation, which is where you tell your customers something incorrect, such as that the product you sell them works with a specific device when it does not. 

Your online customers must also ensure they use all channels with your online brand to get a refund before applying Section 75 protection.

3. Chargebacks & Credit Card Refunds

A key point to be aware of in terms of credit card refunds is about chargeback. This is where your online customer asks for their money back from their bank when they have an issue after a credit card transaction. For example, where they have been let down when purchasing your online products or your online services. This may be because the products or services you have given them are:

• damaged;
• different from your description; or 
• you failed to deliver them.

Your online customers will get their funds back from your bank which their payment initially goes to. However, your online customers have to have gone through all your procedures before they can make a chargeback claim. Also, as chargeback applies to debit and credit cards, there are some differences between the two. For credit cards, your eCommerce customers usually use this procedure where the purchase costs less than £100. 

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Key Takeaways

When you run an eCommerce brand as a distance seller, you have a legal obligation to refund your customers. This is where they ask for one for any reason within 15 days of purchase. However, there are exceptions to this rule. This refund rule applies to purchases made by credit cards, too. There are also other points to note about credit card refunds as an online brand. You should know that your customers can ask for their money back from you directly through their bank, which is a chargeback. Also, customers who pay by credit card enjoy extra protection in terms of credit card refunds. This is where the purchase is £100 or more, and they have specific reasons for the refund and have exhausted a refund directly with you. This protection is a Section 75.

If you need help understanding the intricacies of credit card refunds, contact our experienced eCommerce lawyers 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.