Refunds: Rights and obligations explained
After receiving a high-volume of consumer complaints regarding cancellations and refunds in recent months, the Competition and Markets Authority (CMA) launched investigations into the following sectors: weddings and private events, holiday accommodation and nursery and childcare providers. The watchdog is also urging the government to bring in emergency laws to stop retailers profiteering during the coronavirus pandemic. Here, Trish D’Souza and Chloe Walsh consider where the law currently stands.
What does the law say about a refund?
Where a contract is not fulfilled, consumer protection law i.e. the Consumer Rights Act 2015 (CRA) will generally kick in to enable consumers to obtain a refund.
The CRA applies to all contracts between business and consumers (i.e. individuals who make purchases for personal use, rather than for trade or business) for goods, services or digital content. This includes higher education providers, who have consumer law obligations towards their students.
The CMA considers refunds are payable in circumstances where:
- a business cancels a contract without providing the consumer with the promised goods or services
- a business cannot provide a service, because the government’s public health measures prevent it
- the consumer cancels the contract, or is unable to receive the services, as a result of the government’s public health measures
Where the contract has been performed in part, and the consumer has already received some of the services, the CMA advises there should be a refund for services not received but there’s no obligation to provide a full refund.
What about ongoing contracts?
Where a consumer receives a regular service for a regular payment, such as a gym membership, businesses should offer consumers a partial refund to reflect any services that they cannot provide as a result of public health measures.
The consumer should also be entitled to withhold payment for any such services. Provided this is set out clearly in the contract, the business may be able to claim a contribution from the consumer to its costs until the services can be resumed.
In respect of future services, a business should not seek payment when it knows it won’t be able to provide the services. However, if the business reasonably expects to provide the service in accordance with the contract, the CMA advises that, in general, the business can require consumers to carry on making these payments for the time being.
No Admin fees
It’s important to note that the CMA advises that consumers should not be required to pay any administrative fee for processing a refund and the timeframe for receipt should be clearly communicated.
Businesses are entitled to offer credits, vouchers, re-booking or re-scheduling as an alternative to a refund. However, consumers should not be misled or pressured into accepting an alternative and a refund should still be an option that is just as clearly and easily available. If there are any restrictions which apply to a voucher or credit note, these must be fair and should be made clear to consumers.
If your organisation is being hit with refund requests and you’d like to seek further advice about any of the issues set out above, don’t hesitate to get in touch.
