CANCELLING YOUR SERVICES BECAUSE OF COVID-19

The current global situation has really been a crappy way to start 2020, especially for small business or start-up owners. All the optimism we inherently carry on every January 1, wiped away by a pretty efficient and indiscriminate bug.

Unfortunately, this means a direct impact on your business – its ability to keep trading or to deliver services in the ordinary way. You already have so much to think about – how to keep your business float, what you can pivot to – but what about your customers? 

What about the money they have paid for services you can’t deliver as initially promised? Do you have to refund the cash to your customers? Can you keep some of it as a “cancellation” fee?

Read ‘em their rights!

Most countries have laws that protect consumers. They vary from country to country. In Australia, businesses that provide goods or services used for private or domestic purposes must comply with a set of consumer guarantees. These laws apply also to “business” customers where the goods or services you provided to them is less than $40,000.

These guarantees are automatic (you don’t have to do anything, and they cannot be altered by agreement). See here for more information on these guarantees.

Usually, when a service isn’t able to be delivered, depend on whether the problem is a major or a minor problem you must offer your customers the ability to cancel, to get a refund or compensation for any losses they have suffered, at their election.

During COVID-19, however – this isn’t always the case. Do you know what you are able to do without breaching your obligations under these consumer guarantees? When are you required to give them back all their money?

Time – see what’s become of me!

Essentially, there are really only two scenarios:

• Cancellation before any restrictions were imposed

If the customer decided to cancel before any government restrictions were in place, their rights will depend on the terms of your agreement with that them. You know – your standard policy on cancellation. This situation would fall under the “change of mind” scenario in your agreement – even if their cancellation was because they were afraid for their health. If you’re like most businesses, you will have listed a cancellation fee, which is most likely a tiered percentage of the money paid, depending on the timing of the cancellation. 

Be aware though - this will not be the case if you cancelled – then your customer should be entitled to a full refund.

• Cancelling after any restrictions were imposed

Where the government has imposed restrictions that prevents the delivery of the services, then you are in the driver’s seat about which option you can ask your customers to take. Depending on the service and the circumstance, you could offer them a credit-note or a voucher for the full amount, or a refund. Your call. To preserve cash-flow, offering a credit-note or a voucher is likely to be the better option for you. If your customer doesn’t want a credit-note or a voucher, then any refund can be subject to a cancellation fee.

But wait – there’s more!

Unfortunately, things aren’t always as clear cut. The Australian Competition and Consumer Commission (the consumer rights watchdog) requires that all businesses be reasonable in their treatment of their customers. What is reasonable will depend on the service and what can be done. Some examples:

• If the services are time-bound and are not going to be able to be supplied, then you should not charge for them. For example, monthly gym memberships where you have closed the gym.
• If the services can be delivered at another time and it is reasonable for that to happen, then you can insist your customer agree to a delayed delivery time, rather than cancel and ask for a refund. For example, if your customer paid for a box of wine to be delivered, but you can’t deliver it in the usual delivery time period. They might just have to wait! So long as the extended delivery period is reasonable, given the circumstances.

What now?

Some tips to handle this situation:

Know at the details of your refund policy. That will guide you on most of the customer queries you are likely to get.

Understand your obligations under the consumer guarantees and have a position about how to deal with your customers and their refund requests.

Script your staff so that they understand how to deal with these requests or queries from your customers. Some important don’ts:

X  Don’t mislead them about their consumer rights.

X  Don’t be discourteous or disrespectful.

X  Don’t be inflexible – you might open yourself up to other claims!

Document all correspondences with your customers. Even if you do it by phone, follow up with an email. It will help later if there are any concerns or claims.

Manage your customer’s expectations and keep them in the loop with your decisions and the progress of your agreed actions.

This global situation has forced many businesses to struggle and to manage cancellations. Your customers are feeling the brunt of it too. To survive, you will need to balance your treatment of your customer’s refund request with your imperative to maintain cash-flow. That balance is important because when this global situation comes to an end, your customers will remember (and likely reward) those businesses who have been respectful and considerate of their situation.

If you need help in understanding your obligations or in formulating your position on refunds, please let me know!