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"No Refund" Sign Breached Fair Trading Act

Shanton Factory Store Admits "No Refund" Sign Breached Fair Trading Act: Warning To All Factory Stores

An admission by Shanton Apparel (NZ) Limited that the "no refund" sign at its "factory" store breached the Fair Trading Act is a timely warning to all factory stores that they must offer consumers refunds for faulty goods.

The Commission's Fair Trading Manager Rachel Leamy said that there has been an increase in the number of factory outlets recently but many do not seem to understand consumers' rights.

Ms Leamy said that if goods are faulty or have defects, then consumers are entitled by law to a refund. This applies in exactly the same way to factory shops as to other traders.

It applies to goods bought at sales, as the end of a line or on lay-by. If goods are sold as seconds, then any defects must be specifically drawn to consumers' attention. If defects in seconds are not identified, then consumers are entitled to a refund if they return the goods.

Traders cannot contract out of these obligations. That is, they cannot use posters, contracts, terms of trade or anything else to take away consumers' rights.

However, consumers must be aware that traders do not have to give refunds if consumers simply change their minds about goods. An acceptable policy would be a statement like: "We do not have to provide a refund if you have changed your mind about a particular purchase, so please choose carefully. If goods are faulty we will meet our obligations under the Consumer Guarantees Act to provide a remedy." A4 size posters stating this policy are available free of charge from the Commission and the Ministry of Consumer Affairs.

Ms Leamy said that in a settlement with the Commission, Shanton Apparel (NZ) Limited has given signed undertakings including that it:
* admits that the no refund policy at its "Shanton Enz" Panmure store breached the Fair Trading Act
* will report back to the Commission within one month on how it has changed the refund policy at the "Shanton Enz" Panmure store to ensure that it meets legal obligations
* will ensure that all its "Shanton Apparel", "Shanton Enz" and "Bed, Bath & Beyond-Linen for Less" stores do not mislead customers about their rights
* will report to the Commission about a company-wide compliance programme, and
* understands that if the settlement is not honoured the Commission could take court action.


The Consumer Guarantees Act gives consumers rights to guarantees that goods and services meet particular standards. It also gives consumers rights to remedies, including refunds, if goods or services are faulty or defective. Traders must, by law, honour these guarantees and remedies when selling to consumers.

The Fair Trading Act prohibits false or misleading claims about rights. Statements that consumers are not entitled to refunds are a misleading claim about consumers' legal rights. The Commission has successfully prosecuted other companies that made misleading claims about consumers' rights to refunds.

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