“Free Repair If Faulty” Is No Longer Enough Under New Laws - Make Sure Your Business Is Doing It Right

If your returns sign still says “free repair if faulty”, it’s time for an urgent refresh.

Under the Australian Consumer Law (ACL), customers have strong rights when goods or services don’t meet consumer guarantees. In many cases, customers can choose a refund or replacement - not just a repair - and businesses that suggest otherwise risk breaching the law.

Recent enforcement activity and updates around penalties and contract terms also mean there’s far more at stake for getting your refund wording wrong. The good news? With the right language in your policies and staff training, you can be compliant and still set clear boundaries that work for your business.

Below, we break down what’s changed, why “repair-only” messaging is risky, and what to update across your signage, website and receipts so you’re doing it right.

What Changed Under The Australian Consumer Law?

The ACL has long given customers automatic consumer guarantees on goods and services, such as acceptable quality, fitness for purpose and services delivered with due care and skill. What’s changed in recent years is the focus on stronger enforcement, higher penalties, and fairer terms in standard form contracts.

Higher Penalties And More Enforcement

Regulators have increased penalties for ACL breaches and are more active in pursuing misleading or restrictive refund wording. If your policy or sales scripts limit rights (for example, “no refunds” or “repair only”), you may be exposed to claims of misleading or deceptive conduct or false or misleading representations.

Unfair Contract Terms Crackdown

Standard form consumer and small business contracts are now subject to tougher rules, and unfair contract terms can attract significant penalties. Clauses that restrict statutory rights (e.g. “we only provide repair; no refunds for faults”) are risky. It’s wise to have your customer terms reviewed with the unfair contract terms regime in mind.

Warranties Against Defects: Mandatory Language

If you offer a warranty (for example, “12-month manufacturer’s warranty”), your document must include mandatory wording that the warranty is in addition to the ACL guarantees. A one-line “free repair if faulty” statement won’t cut it. Use a compliant Warranties Against Defects Policy so customers are clearly informed about their rights.

Why “Free Repair If Faulty” Can Mislead Customers

A blanket “repair only” promise suggests customers can’t get a refund or replacement. That’s not how the ACL works.

• For a major failure with goods, customers can choose a refund or replacement. You can’t force a repair.
• For a minor failure, you can choose to repair, replace, or refund - but you must do so within a reasonable time.
• For services, significant problems (e.g. not fit for purpose, major delays, or unsafe) allow customers to cancel and get a refund for the unused portion.

Even if you intend to be generous, “repair only” messaging can mislead customers about their ACL rights. That’s where many businesses run into trouble. It’s much safer to say you’ll “work with customers under the ACL to provide a repair, replacement or refund, depending on the issue”.

Also avoid time limits that imply rights expire (e.g. “returns only within 30 days for faults”). The ACL guarantees apply for a reasonable time based on the product or service - not a fixed period you select. If your policy conflicts with the ACL, the law wins.

What Your Business Must Offer When Goods Or Services Fail

Let’s break down what you need to provide under the ACL. Getting this right on your receipts, website and in-store signage will help you avoid disputes and keep regulators happy.

Goods: Major Vs Minor Failure

• Major failure includes problems that would have stopped a reasonable consumer from buying, substantial unfitness for purpose, safety issues, or where the problem can’t be fixed in a reasonable time.
• Customer’s choice for major failure: refund or replacement (and sometimes compensation for foreseeable loss or damage).
• Minor failure is a problem that can be fixed within a reasonable time. You can choose to repair, replace or refund. If you don’t act promptly, the customer may be entitled to a refund or replacement.

Services: When Refunds Are Required

• If services aren’t provided with due care and skill, aren’t fit for the agreed purpose, or aren’t delivered within a reasonable time, customers may be entitled to a remedy.
• For a major problem with services, the customer can cancel and get a refund for the unused portion (and may claim compensation for loss or damage).

Spare Parts And Repairs

Manufacturers must ensure reasonable availability of spare parts and repair facilities for a reasonable time. If you know parts won’t be available, disclose this clearly before sale.

No “No Refunds” Policies

It’s unlawful to display or enforce a blanket “No Refunds” policy. You can set reasonable conditions for change-of-mind returns, but nothing can limit or exclude ACL rights for faulty goods or services.

How To Update Your Policies, Website And Staff Training

Compliance isn’t just the words on your returns sign. It covers your sales scripts, receipts, online checkout, and internal processes. Here’s a practical roadmap.

1) Fix Your In-Store And Online Wording

Replace “repair only” or “no refunds” wording with a statement that acknowledges all three remedies under the ACL: repair, replacement or refund, depending on whether the issue is major or minor. If you offer a commercial warranty, ensure your warranty document carries the mandatory ACL disclosure (and required contact details and process steps).

If you sell online, include clear, customer-facing terms like Terms of Sale and Website Terms and Conditions that properly reference consumer guarantees and your returns process.

2) Align Internal Processes With The Law

• Set up a system for assessing major vs minor failure quickly and consistently.
• Define reasonable timeframes for repair and escalation steps if parts are delayed.
• Track claims data to spot recurring faults or potential safety issues.
• Have a clear handover process from customer service to technical teams for complex assessments.

3) Train Your Team

Frontline staff need simple scripts and examples. Role-play common scenarios so they understand when a refund must be offered vs when a repair is appropriate. Make it easy for staff to say “yes” where the law requires it - and to escalate tricky situations.

4) Review Standard Form Contracts And Warranties

Scan your agreements for clauses that restrict ACL rights or look unbalanced. If you rely on standard form contracts (for example, booking forms, installation terms, or subscription T&Cs), have them checked for unfair contract terms, especially anything that attempts to exclude liability for consumer guarantees.

5) Keep Your Privacy And Communication In Step

If you collect customer details for returns or service bookings, make sure you’re transparent about how you handle data with a current Privacy Policy. Clear communication builds trust, reduces complaints, and supports good outcomes if something goes wrong.

6) Get Tailored Consumer Law Support

If your products or services have nuanced risk (for example, technical installations, safety considerations, or subscription models), consider a quick review of your refund wording and processes under our Consumer Law services. A small tweak to your terms now can prevent a costly dispute later.

What Should Your Refunds And Warranty Wording Say?

Here’s a practical guide to the statements and policies most businesses need. Use this as a checklist to update your receipts, website and emails.

Core Messages To Include

• Acknowledge ACL rights: “Our goods and services come with guarantees that cannot be excluded under the Australian Consumer Law.”
• Explain remedies: “If a product or service has a major problem, you can choose a refund or replacement. If the problem is minor, we’ll repair, replace or refund within a reasonable time.”
• Set a simple process: “Please contact us with your proof of purchase so we can assess the issue. We may need photos, a fault description, or to inspect the item.”
• Timing and logistics: “We’ll advise expected repair timeframes and next steps. If a repair isn’t feasible in a reasonable time, we’ll provide a refund or replacement.”
• Change of mind (optional): Clarify your own policy for non-faulty returns (e.g., store credit within 14 days, unopened packaging), making clear this is separate from ACL rights.

What To Avoid

• “No refunds” or “repair only” statements.
• Implying rights expire within a fixed period when a reasonable time may be longer.
• Complex or burdensome processes that deter legitimate claims (e.g., excessive forms, strict deadlines unrelated to the fault).
• Terms that try to exclude responsibility for major failures or safety issues.

Recommended Documents To Have In Place

• Returns & Refunds Policy: A clear, public-facing policy describing your process under the ACL and any change-of-mind rules you offer.
• Warranties Against Defects Policy: If you offer a commercial warranty, ensure it uses the mandatory ACL wording, outlines what’s covered, the claim process, and your contact details. Consider a tailored Warranties Against Defects Policy.
• Customer Terms: If you sell online or on account, set transparent Terms of Sale and Website Terms and Conditions that align with the ACL.
• Internal Guidance: A staff playbook with examples of major vs minor faults, evidence you may request, and escalation paths.

Common Scenarios And How To Handle Them

“The Product Failed After 12 Months - Our Warranty Is Over.”

Even if a commercial warranty has expired, consumer guarantees may still apply for a reasonable time given the product’s nature and price. Avoid rigid time-based refusals without assessing the product and the defect. Your team should be trained to escalate these cases for a fair assessment.

“We Can Repair It, So No Refund.”

If the failure is major, the customer can choose a refund or replacement. If it’s minor and can be fixed within a reasonable time, you can choose to repair. Document your assessment and communicate timeframes clearly.

“The Customer Didn’t Keep The Box.”

Reasonable proof of purchase (receipt, invoice, bank statement) is usually sufficient. Packaging is generally not required for a fault claim under the ACL. If you need the product to assess the issue, explain the return process and who covers shipping in different scenarios.

“We Outsource Repairs To The Manufacturer.”

You’re still responsible under the ACL. Make sure your repair partner’s timeframes and communications align with your policy. Where delays become unreasonable, be ready to offer a replacement or refund.

“The Customer Wants Compensation Too.”

Customers may claim compensation for reasonably foreseeable loss caused by a failure. If you receive a claim, assess it carefully and escalate early if it’s complex or high-value.

Compliance Tips To Reduce Disputes And Complaints

• Keep scripts short and clear: Provide simple guidance your team can follow under pressure.
• Use examples in training: Role-play major vs minor failures, safety defects, and delays.
• Track and learn: Review claims data quarterly to spot recurring issues or product lines needing attention.
• Align sales and service: Make sure marketing promises match actual performance, to avoid misleading or deceptive conduct concerns.
• Refresh terms regularly: Revisit your return wording and contracts with the latest enforcement trends and unfair contract terms in mind.

Key Takeaways

• “Free repair if faulty” is not enough under the ACL and can mislead customers about their rights to a refund or replacement for major failures.
• Your public wording should acknowledge consumer guarantees and explain that remedies may include repair, replacement or refund depending on the issue.
• Update your in-store signage, receipts, online checkout and warranty documents so they align with the ACL and include any mandatory statements.
• Train staff to assess major vs minor failures, set reasonable repair timeframes, and escalate tricky situations early.
• Review standard form contracts and customer-facing terms for compliance with unfair contract terms rules and ensure your Terms of Sale and Website Terms and Conditions reflect the ACL.
• If you offer a commercial warranty, use a compliant Warranties Against Defects Policy and make clear it sits alongside ACL rights.

If you’d like a consultation on updating your refunds, warranties and customer terms to comply with the Australian Consumer Law, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.