Managing refunds and cancellations due to COVID-19

The consumer watchdog has issued guidance to assist small businesses to understand their rights and obligations under the Australian Consumer Law.

“We know a lot of small businesses are facing a very challenging time, but they still want to do the right thing by their customers,” ACCC Deputy Chair Mick Keogh said.

The ACCC has developed the guide for small businesses to help minimise any confusion when it comes to managing refunds and cancellations due to the impact of COVID-19. 

The guide outlines small business rights and obligations relating to issues such as cancelled functions and events, pricing of goods and services, and charging subscription and membership fees when the business is not operating.

We are witnessing more and more events, flights or other travel services such as cruises cancelled. The ACCC expects refunds or other remedies such as a credit note or voucher to be offered to consumers.

However, if the event, flight or travel service is cancelled due to government restrictions, consumer rights under the consumer guarantees may be impacted. In these situations, consumers may be entitled to a refund under the terms and conditions of their ticket, or potentially may make a claim under a travel insurance policy. 

“Given the exceptional circumstances, the ACCC encourages all businesses to treat consumers fairly and compassionately,” ACCC Chair Rod Sims said.

Businesses are reminded that they must honour the terms and conditions of their contracts with customers.

“As a business, if you are unable to provide goods or services during this time, you have the opportunity to work with your customers to find a mutually agreeable alternative arrangement,” Mr Keogh said.

“This could include providing a partial refund, a credit note or voucher, or rescheduling to supply the services at a later date where this is possible.”

“It is important for small business to understand their obligations when handling requests from consumers. Failure by any business to honour its cancellations or refunds policy may constitute misleading conduct under the Australian Consumer Law,” Mr Keogh said.

In the event of cancellation, can businesses rely on a contractual term that allows them to keep any deposit or upfront payment?

In many circumstances, a term allowing a business to retain the full deposit or payment without having delivered any goods or services may be considered unfair as it may not be reasonably necessary to retain the full amount to protect legitimate business interests. However, this is unlikely to be the case if you are covering the costs incurred.

Further information

The ACCC’s guidance for consumers may also be relevant for small businesses, which, under Australian Consumer Law, may be legally defined as consumers when engaging with other businesses.

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