Refund is probably one of the scariest words in the world of business and there is no running away from it. Having a no refund policy is actually illegal and very dangerous. It could get you into an even worse situation – getting fined for neglecting the Consumer Protection Act.

Read the Malaysian Consumer Protection Act here.

Now, we don’t mean to frighten anyone, but we want to make sure that you are well informed and aware of how important and serious a refund is. In this post, we’ll guide you on the situations that make a refund compulsory.

First things first, the benefits.

Having a well-structured refund policy will attract more loyal customers. A pro-customer policy will give customers that boost of confidence, trust & love towards your brand. Most consumers will actually read through the return/refund/exchange policy before making their purchase. Also, this is where you explain to the customers of the standard procedures for a refund so that they are well informed.

Having a refund policy will protect your business so you don’t waste too much time, energy and money. It is important to note that just because every customer has the right to ask for a refund, does not mean they are entitled to it. However, there are certain circumstances where you are required to provide a refund.

When Refund is Mandatory.

  1. Customers are not informed about return policy.

The policy needs to be agreed upon BEFORE the payment is made, and not after (e.g in the checkout page instead of the payment receipt). Yes, this is the purpose of the T&C checkbox at the checkout page, please review and update it at least once a year or as frequently as you launch a new product. The UI/UX of your checkout plays an important role in this.

  1. Cancellation of a future services contract.

Such as gym membership, facial treatment or therapy sessions. Consumers are entitled to cancel their contracts for whatever reasons including migrating to another place or simply not being able to attend anymore. In this case, they can only be charged either; 5% of the full price, OR the cost of any goods used or kept, OR the pro-rated price of the services used; the rest should be refunded.

  1. Major or minor damaged goods

Faulty goods are unacceptable especially for high end or premium items. If you are unable to repair it, do offer replacement or product exchange. Customers do have the right to insist for a refund. The best is to ask them to return the product and then process the refund. However, in cases where defects were brought to their attention for a lower price, it is then not acceptable as a reason to request for refund.

  1. Delivered the wrong items

When your team makes the mistake, you have to own up to it. You can bear the return/reshipping cost or let the customer keep the product. If the customer does get a better (more expensive) product and does want to keep it, let them.

  1. Unsafe or ‘unfit for the purpose’

For example, you advertised a “three-seater sofa”, but sent out a “miniature three-seater sofa” instead. Or maybe you listed a dress in “UK size 8” but sent a “US size 8” instead.

How to Spot an Illegal Refund Policy 

  1. It’s oppressive – Stating customers have no right to claim for refund at all.
  2. It’s troublesome – Asking customers to go to multiple centres to file for a refund.
  3. It’s not taking responsibility – Not giving a good reason to cancel an event or sessions. For example, “The organiser reserves the right to cancel or postpone the event without prior notice. The organiser will not be responsible for any loss or inconvenience caused.” 

Handling a refund can be very challenging, whether you’re selling tangible or intangible goods. However, if you structure your refund policy well, and have a good standard operating procedure and system, it can be done faster and give less of a headache. It’s definitely possible to still be able to make your team and customers happy despite it all.

P/S: Our merchant portal lets you make refunds as easy as one click of a button. And they are all properly recorded! Do leave a comment if you have any questions 🙂