Understanding refunds, exchanges and your obligations under the Consumer Guarantees Act (CGA)
Retailers often face questions from customers about refunds, exchanges, and their rights under consumer law. Understanding your obligations (and your options) under the Consumer Guarantees Act (CGA) can help you handle these situations confidently and fairly. Furthermore, having a clear refund and exchange policy can help manage your customers’ expectations and avoid confusion or disputes.
Why having a refund and exchange policy is helpful
Having a clear refund and exchange policy is beneficial for both your business and your customers. Here’s why:
Reduces disputes
A well-defined policy helps manage expectations and can prevent misunderstandings or complaints.
Supports staff decision-making
Your team will feel more confident handling returns and exchanges when they have clear guidelines to follow.
Click to read about adjusting your returns policy for the holidays.
How to communicate your policy effectively
When can a customer ask for a remedy?
Customers might be entitled to get a repair, replacement, refund or other remedy under the CGA if:
- products or services don’t do what they are meant to or are defective
- products or services are different from their description, for example, on packaging or in advertising
- products don’t match the sample or model they were shown
- products or services are not reasonably fit for a particular purpose that you informed the consumer about
- you did not have the right to sell the product
- delivery is late or never arrives, or products are damaged in transit.
As a retailer you have the right to:
- refuse a consumer’s offer to buy a product or service (so long as you don’t breach the Human Rights Act or the Commerce Act)
- ask questions about and inspect any product or service a consumer says does not meet the CGA guarantees
- decide to repair, replace or refund a product — or fix a problem with a service if it can be fixed
- refuse a refund or any other remedy if a consumer changes their mind about a product or service
- refuse a refund or other remedy where the issue was not caused by a fault with the product or service, such as where the consumer has damaged, misused, or altered the product.
Do I need to offer a store credit for a ‘change of mind’ return?
You are not obliged to offer a remedy for ‘change of mind’ returns, but many retailers choose to do so. You may choose to offer a store credit rather than a refund or exchange for ‘change of mind’ returns.
If you choose to offer store credit, refunds or exchanges for change-of-mind returns, we recommend having a clear policy that sets out any conditions, applicable timeframes, and the terms of any store credit offered.
Want more advice?
If you have any questions, contact our Advice Service on 0800 472 472 (1800 128 086 from Australia) or email [email protected].
