The consumer’s right to a refund

Since the commencement of the Consumer Protection Act, there have been some businesses who have stubbornly resisted compliance with its provisions, for example declaring as a shop policy that no refunds or returns will be allowed under any circumstances. There have also been many consumers who have misconceived their rights under the Act, believing that they have an unfettered entitlement to return goods and insist upon a refund, for any reason or no reason at all.

There are a number of respected businesses who allow consumers to return goods purchased from them – for a full refund, with no questions asked – within a specific number of days. These businesses have such a policy because they realise that it is such an attitude to business which produces happy, loyal customers. They are under no legal obligation to accept returns and make refunds in all cases.

For example, you might buy a book from a local store but later change your mind and wish to return it the following week (undamaged) without having read it. The shop may agree to take it back from you and refund you. They do this to keep you as the customer happy, and not because they are under any legal duty to do so.

The Consumer Protection Act provides that, where goods are found to be defective in quality within six months of their purchase, the customer may insist upon a refund, or may allow the seller the chance to repair or replace the goods. Thus, if you buy a coffee machine which stops working, after three months’ normal use, you can return it to the seller with your proof of purchase and require a refund.

In cases where the goods are not defective, however, there are only limited instances in which the consumer is legally entitled to return the goods. Such instances include, amongst others, during the cooling-off period after a sale through direct marketing, and when a specific purpose for the goods was made clear to a specialist seller but the goods were found unsuitable for the purpose after delivery. In such cases, the refund payable might be less than the amount paid by the customer, if the goods were used or consumed before return (more than was necessary to determine a problem), or if the goods require unnecessary repackaging before they can be resold.

For example, I receive a telemarketing call offering me a bronze bird bath for my garden. I accept the offer and it is delivered to me the following day. I soon realise that it is an utter eyesore and I do not want it after all. I cancel the sale within the cooling-off period and am entitled to a full refund.

Or, I order petfood pellets from a specialist store. I explain to them that I need them for my many pet rabbits. When the goods arrive, I discover that they are for feeding sheep, not rabbits. I return the pellets for a full refund, as they are not suitable for the agreed purpose of my order.

Or, after discovering that the petfood pellets are not for rabbits but for sheep, I give a bagful to my friend who has a sheep on her property, and I return the rest. I receive a partial refund only, because I used more of the product than was necessary to discover the problem.

Or, after discovering that the pellets are not suitable for my pet rabbits, I wait for a few weeks and then contact the seller and demand a refund. I am not entitled to one because I waited too long to exercise my right. The Act requires me to act within ten business days.

Whilst there are only limited instances in which a consumer can insist upon a refund, when one such instance applies, the business may not insist on providing a credit note instead. The consumer is entitled to the return of his or her cash.

Where the return is not one provided for by law, but is merely the shop’s policy in a bid to provide better customer service than the legal minimum, then it is the business’s prerogative to provide a cash refund or a credit note.



The Consumer Commission – off to a poor start

Since the passing into law of the Consumer Protection Act, many consumers, businesses and legal professionals have been waiting for the new Act to be tested in reported cases, to provide practical guidance for the future.

One such case came before the National Consumer Tribunal just a fortnight ago. The case was brought by Kia Motors, against the National Consumer Commission. The Commission had earlier issued a compliance notice against Kia, under the CPA. Kia challenged the lawfulness of the compliance notice on a number of grounds. The Commission failed to defend the challenge, neither filing papers nor appearing at the hearing of the matter.

By way of background, in 2010 a Mrs J brought her two-year old Tata car to Kia for servicing. While her car was at Kia’s premises, another car reversed into it, causing damage to the fender. Kia provided and installed a replacement fender to Mrs J’s vehicle, at its own cost. Several months later, Mrs J indicated that she was not satisfied with these repairs. She was invited to bring in her vehicle to discuss her unhappiness but she elected not to. Instead she approached Commission, and lodged a complaint against Tata, the original retailer of her vehicle. Tata clearly had nothing whatsoever to do with the dispute, and after filing papers indicating as much, the complaint was directed against Kia instead.

After Kia filed its response to the complaint, the Commission went ahead and issued a compliance notice against Kia. Remarkably, that notice required Kia to “replace the vehicle or refund the deposit, all instalments and repair costs”.

Not surprisingly, Kia was unwilling to accept this notice, and challenged it on a number of grounds before the Tribunal. These included that the incident took place before the CPA became law, that there were no grounds on such which a notice could be issued, and there had been no investigation as required by the Act before the notice was issued.

The Tribunal agreed that Kia had genuine cause for complaint. The incident had indeed occurred before the CPA came into effect. The damages were also delictual in nature – arising from a collision of vehicles – which was not the subject-matter of the CPA at all. The Commission had issued the notice without undertaking the necessary investigation. The Commission also lacked the power to order a party to repay amounts received – only the Tribunal enjoyed that power.

In the end, the compliance notice was set aside, however without any order holding Mrs J or the Commission liable for Kia’s costs. Effectively, Kia was compelled to go to great trouble and expense to undo the Commission’s bungling, and restore the original position with no benefit to itself (or Mrs J for that matter).

A review of other reported cases emerging from the Tribunal sitting in review of notices issued by the Commission, suggests that this is not an isolated instance. A number of notices have been issued concerning matters outside the scope of the Commission’s powers, without proper investigation. The Commission is not engaging with the Tribunal’s processes to defend its actions, but is simply allowing hearings to proceed in its absence, with the effect of reversing what it has done. This is a worrying early trend for such a new institution.

A recent Auditor-General’s report had much criticism for the management of the Commission, and an acting Commissioner currently holds the reins pending a new appointment by Trade and Industry.

Consumer website is replete with overwhelmingly negative feedback from the public concerning the Commission’s performance thus far.

While the CPA is generally looked upon as a positive and exciting development for consumers, without an effective and credible mechanism for enforcement, the Act will not live up to its promise. It is hoped that new leadership will soon be appointed who will breathe life into the Commission and enable it to fulfil its mandate to the public in an efficient and sensible manner.

Persons wanting to refer complaints under the CPA to the Commission may download the necessary form at their website