Refund Policy In New Zealand: Returns, Exchanges And The Consumer Guarantees Act

If you sell products or services in New Zealand, you’ll eventually deal with a customer asking for a refund, exchange, repair, or store credit.

And while it’s tempting to solve this with a quick “no refunds” sign (or a one-line policy on your website), refund rules in New Zealand aren’t just about what you’d prefer as a business owner. A big part of the answer is set by consumer law, especially the Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA).

Getting your refund policy right helps you do two things at once:

• stay compliant with New Zealand consumer law (so you don’t accidentally promise something unlawful), and
• set clear expectations upfront (so refunds and returns don’t turn into arguments, chargebacks, or bad reviews).

Below, we’ll walk through what a refund policy should cover, what the law says customers are entitled to, and what you can and can’t say when you’re trying to limit refunds.

What Is A Refund Policy (And Why Does It Matter In NZ)?

A refund policy is the set of rules you give customers about how returns, exchanges, repairs, or refunds work in your business.

In practice, your refund policy might show up as:

• website terms (for ecommerce),
• a printed sign at the counter,
• receipt wording, or
• terms in a customer agreement for services.

For small businesses, a clear refund policy matters because it can reduce “grey area” disputes. But it also matters because your policy can’t take away rights customers already have under the CGA or FTA.

In other words, your refund policy can offer more than the law, but it usually can’t offer less for consumers.

If you run an online store, it’s also worth looking at how your refund policy fits into your broader legal documents, like E-Commerce Terms And Conditions and your Privacy Policy (because returns often involve collecting customer details, shipping addresses, and purchase records).

What Does The Consumer Guarantees Act Say About Refunds And Returns?

The Consumer Guarantees Act 1993 is one of the key laws that governs refunds, returns, exchanges and repairs when you sell to consumers (generally, people buying for personal, domestic or household use).

Under the CGA, consumers get automatic “guarantees” when they buy goods or services. These are legal standards that apply whether or not you mention them in your refund policy.

Consumer Guarantees For Goods

When you sell goods to consumers, the goods generally must be:

• of acceptable quality (including being safe, durable, and free from defects),
• fit for purpose (including any purpose the customer tells you about),
• match their description (and sample, if relevant), and
• delivered on time (if delivery timing is agreed).

If goods don’t meet these standards, the customer may be entitled to a remedy. Depending on whether the problem is minor or substantial, the remedy could include a repair, replacement, or refund.

Consumer Guarantees For Services

If you provide services (including trades, professional services, and many digital services), they must generally be:

• carried out with reasonable care and skill,
• fit for the particular purpose (if the customer relies on your expertise), and
• completed within a reasonable time (if no time is set).

If services fail these guarantees, the customer may be entitled to have the issue fixed, or in some cases, to cancel the service contract and receive a refund for some or all of what they paid.

Minor Fault Vs Substantial Failure (Why It Matters)

A lot of refund disputes come down to the difference between a minor issue and a substantial failure.

While each situation depends on the facts, the basic idea is:

• Minor issue: you can usually choose to repair or replace within a reasonable time (or fix the service). If you don’t fix the issue in a reasonable time, the consumer may be able to reject the goods and seek a refund or replacement.
• Substantial failure: the customer can usually reject the goods and choose a replacement or refund, or cancel the service.

This distinction is one reason why a one-size-fits-all “refund policy NZ” template can backfire. Your policy needs to reflect how remedies work under the CGA and what you’ll do operationally when things go wrong.

Can You Have A “No Refund Policy” In New Zealand?

This is one of the most common questions we hear from business owners.

You can choose not to offer refunds for things like “change of mind” returns (for example, someone decides they don’t like the colour), but you generally can’t refuse refunds or other remedies when the CGA applies and the goods or services fail the consumer guarantees.

So a “no refund policy” can be misleading if it suggests customers never have refund rights.

That’s where the Fair Trading Act 1986 comes in. The FTA requires your advertising and customer communications to be truthful and not misleading. If you tell consumers “NO REFUNDS” without clarifying that CGA rights still apply, you risk breaching the FTA.

What You Can Usually Say (If Worded Properly)

Instead of “no refunds,” many businesses use clearer wording like:

• “We do not offer refunds for change of mind purchases.”
• “Returns are available for faulty products in line with the Consumer Guarantees Act.”
• “Sale items are not eligible for change of mind returns (this does not affect your rights under the CGA).”

The key is being accurate, specific, and consistent across your website, receipts, and in-store signage.

If you provide services under a more formal arrangement (especially higher-value services), it can also help to spell out cancellation/refund processes in a Service Agreement, so you’re not relying on casual messages or verbal promises.

When Do Customers Have A Right To A Refund (And When Don’t They)?

From a business owner’s perspective, it helps to separate refund requests into two buckets: change of mind and faulty/not-as-promised.

Change Of Mind: You Can Set The Rules

If a customer simply changes their mind (for example, they bought the wrong size, or they found a cheaper option elsewhere), New Zealand law generally doesn’t force you to provide a refund.

That means you can set your own change-of-mind rules, including:

• time limits for returns (e.g. 7, 14, or 30 days),
• condition requirements (unworn, unused, tags attached, original packaging),
• whether you offer store credit instead of cash refunds, and
• whether sale/clearance items are excluded.

Just make sure your staff are trained to apply the policy consistently, and the policy is easy for customers to find before they buy.

Faulty Goods Or Services: CGA Rights Apply

If the product is faulty, unsafe, doesn’t do what you said it would do, or the service wasn’t carried out with reasonable care and skill, the CGA may apply and your customer may be entitled to a remedy.

Depending on the situation, that remedy could include:

• repair,
• replacement,
• refund, or
• compensation for reasonably foreseeable losses (in some cases).

Importantly, a refund is not always the first step for minor issues. But if there’s a substantial failure, the consumer may have the right to reject the goods and choose a refund.

Common Situations Where Customers Often Don’t Get A Refund

Even where the CGA applies, there are situations where a customer may not be entitled to a refund, such as where:

• the customer misused the product and caused the fault,
• they knew about the fault before buying and accepted it, or
• they caused damage after purchase (e.g. dropped it, exposed it to water, ignored care instructions).

These situations can be tricky in real life, especially where the customer disagrees. Having a clear process for assessing faults (and documenting decisions) can save you a lot of time and stress.

What About Refunds For Business-To-Business (B2B) Sales?

If you’re selling to another business, the CGA doesn’t always apply in the same way.

In many B2B transactions, the parties can agree to contract out of the CGA (as long as this is done in writing and it’s fair and reasonable). If you contract out properly, your terms (and any express warranties you give) will largely govern refund and return rights for that customer.

This is one reason it’s worth having fit-for-purpose terms for wholesale, trade, or supplier arrangements, rather than relying on the same consumer-facing policy you use for retail customers.

What Should A Good Refund Policy Include For Small Businesses?

There’s no single “perfect” refund policy NZ that works for every business. A café, a clothing brand, and a software startup will all handle refunds differently.

But a strong refund policy usually covers the practical questions customers ask (and the legal points you need to get right).

1. Returns Timeframes

Be clear about time limits, such as:

• how many days customers have to request a return,
• how long they have to send an item back, and
• whether different timeframes apply for gifts or Christmas sales periods.

2. Proof Of Purchase Requirements

Explain what you’ll accept as proof of purchase, such as:

• receipt,
• order confirmation email,
• bank statement record, or
• account/order number.

3. Condition Of Returned Items

For change-of-mind returns, you’ll usually want to cover:

• whether items must be unused/unworn,
• packaging and tags requirements, and
• hygiene restrictions (e.g. earrings, swimwear, cosmetics).

Be careful not to frame this in a way that removes CGA rights for faulty products. For example, a faulty item may still be returnable even if packaging is missing.

4. Refund Method (Cash, Card Reversal, Store Credit)

Spell out how refunds are handled, including whether refunds are processed:

• to the original payment method,
• as store credit (typically only for change-of-mind returns, if you choose), and
• within a stated timeframe (e.g. “processed within 5 business days”).

If you use store credit, it’s smart to set out expiry rules and how the credit can be used. This often sits neatly in your broader Business Terms.

5. Shipping Costs And Online Returns

For ecommerce businesses, returns often come down to shipping. Your policy should explain:

• who pays for return shipping (change-of-mind vs faulty item),
• whether original shipping fees are refunded, and
• how customers should return items (tracked courier, return address, required forms).

Because this touches how purchases are made online, it’s common to include these rules in Website Terms And Conditions as well as on a dedicated returns page.

6. Sale Items, Clearance Stock, And Seconds

Lots of small businesses want different rules for discounted items.

You can usually exclude sale items from change-of-mind returns (if you want), but you generally can’t exclude CGA rights if the item is faulty or doesn’t match its description.

If you sell “seconds” or imperfect stock, be very specific about what the known defects are at the point of sale. This is where clear descriptions and accurate labelling are your best protection.

7. How You Handle Faulty Items

This part of your refund policy should align with the CGA process. Many businesses include points like:

• how customers should contact you about faults,
• what assessment process you use,
• when you offer repair vs replacement vs refund, and
• expected timeframes for resolving the issue.

If you’re dealing with higher volumes, it can also help to have an internal checklist and staff script so your team responds consistently (which is also important for brand reputation).

How To Avoid Refund Disputes (And Protect Your Business From Day One)

Refund disputes usually don’t start because a business is trying to do the wrong thing. They start because expectations weren’t clear, or staff weren’t sure what the law allows.

Here are practical ways to reduce refund headaches while staying on the right side of consumer law.

Make Your Refund Policy Easy To Find

If customers can’t find your refund policy before buying, they’ll assume the most customer-friendly option applies.

Good places to display it include:

• checkout pages (online),
• footer links on your website,
• order confirmation emails, and
• in-store signage near the register.

Train Staff On The Basics Of The CGA

Your policy is only as good as how it’s applied. If staff say “we don’t do refunds” when a customer has a valid CGA claim, that’s where complaints escalate quickly.

A simple training approach is to teach staff the decision tree:

• Is it change of mind, or is it faulty/not as described?
• If faulty, is it likely minor or substantial?
• What remedy are we offering, and what is the customer entitled to choose?

Keep Advertising And Product Descriptions Accurate

The Fair Trading Act 1986 is especially relevant for marketing. Overpromising (“waterproof” when it’s actually water-resistant, or “guaranteed results” for a service) is a common source of refund claims.

If you’re running promotions, bundles, or limited-time offers, it’s also worth ensuring the relevant terms are written clearly so customers understand what they’re buying.

Use Proper Terms And Agreements (Not A DIY Template)

It’s easy to copy a generic refund policy from somewhere online, but this can accidentally:

• include unlawful “no refunds” statements,
• conflict with your actual business process, or
• miss key details (like shipping rules or timeframes) that matter for your customers.

Having your refund policy aligned with your customer-facing contracts and online terms is part of getting your legal foundations right from day one, especially as you scale and start dealing with more customer enquiries.

Key Takeaways

• A clear refund policy helps manage customer expectations, but it must still comply with the Consumer Guarantees Act 1993 and the Fair Trading Act 1986.
• You can usually refuse change-of-mind refunds (and set your own rules), but you generally can’t refuse remedies when goods or services fail the consumer guarantees.
• A “no refund policy” can be risky if it misleads consumers into thinking they have no rights - wording needs to be specific and accurate.
• A strong refund policy should cover timeframes, proof of purchase, item condition, sale items, shipping rules for online returns, and how faulty goods/services are handled.
• Refund disputes are often preventable with clear policies, accurate advertising, and staff training on the basics of consumer rights.
• For some B2B sales, it may be possible to contract out of the CGA in writing (where fair and reasonable), so your business terms should reflect how you sell to trade and wholesale customers.

This article is general information only and doesn’t take into account your specific situation. If you’d like help putting the right refund policy and customer terms in place (or reviewing what you already have), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.