You’ve made the sale, you’ve packed the order, and then the message comes through: “I want a refund.”
If you run a business in New Zealand, returns and refunds can feel like a minefield - especially when you’re juggling stock, cashflow, and customer expectations.
This guide (updated for 2026 so you can feel confident it’s current) breaks down your key legal obligations in plain English, including what you must do, what you can choose to offer, and how to set up policies that protect your business from day one.
We’ll focus on the main NZ consumer law rules you’re most likely to deal with, including the Consumer Guarantees Act 1993 (CGA) and Fair Trading Act 1986 (FTA).
What’s The Difference Between A Return, A Refund, And An Exchange?
People often use these terms interchangeably, but legally (and practically), they’re not the same thing.
Returns
A “return” just means the customer gives the product back to you. A return can happen because:
- the product is faulty;
- it doesn’t match what was promised;
- they changed their mind; or
- you offered a voluntary returns policy.
A return doesn’t automatically mean you must refund - it depends on the reason and what the law says.
Refunds
A refund is when you give the customer their money back (usually to the same payment method). Under NZ law, refunds are sometimes mandatory - particularly where there is a “failure” under the CGA that can’t be fixed or is serious enough.
Exchanges
An exchange is when you replace the product with another product (often the same item, or a similar item). An exchange is a common remedy for faulty goods, but it isn’t always the only option - and you usually can’t force an exchange if the customer is entitled to a refund.
Getting clear on the difference matters because the CGA gives consumers certain rights that you can’t contract out of in most consumer sales.
When Do You Have To Provide A Refund Under NZ Consumer Law?
In many cases, you don’t get to decide whether to offer a refund - the law does.
The Consumer Guarantees Act 1993 generally applies when you sell goods or services to consumers (people buying for personal, domestic, or household use). It provides “guarantees” that things you sell must meet.
The Key Consumer Guarantees You Need To Know
For goods, common guarantees include that the product is:
- of acceptable quality (safe, durable, free from defects, and looks acceptable);
- fit for purpose (does what it’s supposed to do, including any purpose the customer told you about);
- matches description (including online listings); and
- matches sample or demonstration model (if that’s how it was sold).
For services, common guarantees include that the service is:
- carried out with reasonable care and skill;
- fit for purpose (gets the result you said it would); and
- completed within a reasonable time (if no time was agreed).
Minor Failure Vs Substantial Failure (Why It Matters)
When something goes wrong, the CGA generally treats issues as either a minor failure or a substantial failure.
Minor failure usually means the problem can be fixed within a reasonable time. In that situation:
- you usually have the right to repair the item (or replace it), rather than immediately refunding; and
- you should act promptly - delays can escalate the issue.
Substantial failure is more serious. It might include situations where:
- the product would not have been bought if the customer knew about the issue;
- the product is unsafe;
- the product is significantly different from its description/sample; or
- the issue can’t be fixed, or can’t be fixed within a reasonable time.
If there’s a substantial failure, the customer can usually choose between:
- a refund;
- a replacement; or
- compensation for reduction in value (depending on the circumstances).
That “customer choice” point is where many businesses get caught out. If the law gives the customer the right to pick a refund, it’s risky to insist on “store credit only”.
Do You Have To Refund Shipping Costs?
This depends on the situation, but a practical way to think about it is:
- If the return is because you supplied faulty goods or something that breaches the CGA, you may end up responsible for reasonable costs associated with resolving it (including return shipping in many cases).
- If the customer is returning something because they changed their mind and you’re offering a voluntary return, you can set conditions (including who pays return shipping) - as long as you’re upfront about it.
If you sell online, it’s worth setting this out clearly in your website terms and policies so there are no surprises at checkout.
Do You Have To Accept Returns For “Change Of Mind”?
In most NZ consumer situations, you don’t have to accept a return just because the customer changed their mind.
Common “change of mind” examples include:
- they ordered the wrong size;
- they don’t like the colour in person;
- they found it cheaper elsewhere;
- they simply decided they don’t want it anymore.
However, there are two big caveats that matter in real life:
1) Your Own Policy Can Create Expectations
If your website, signage, receipts, staff scripts, or social media posts imply customers can return items for change of mind, you should honour that (or you risk disputes and reputational damage).
Where things go wrong is when businesses have a “policy” that isn’t clearly communicated - or when different staff tell customers different things.
2) You Still Can’t Mislead Customers
Even if you don’t offer change-of-mind returns, you must still comply with the Fair Trading Act 1986. That means you can’t:
- make misleading claims about “no refunds ever” if the CGA would require a remedy;
- suggest a customer has no rights when they do; or
- advertise a returns policy that you don’t actually honour in practice.
In other words, “no refunds” signs don’t override consumer law - and if they’re written too broadly, they can create real legal risk.
How Do Exchanges, Store Credit, And “No Refund” Policies Work?
This is where it helps to separate what you want to offer as a business from what you’re required to offer by law.
Can You Offer Store Credit Instead Of A Refund?
Yes - but usually only for change-of-mind returns (i.e. where the customer is not entitled to a refund under the CGA).
If the goods are faulty or don’t meet consumer guarantees, insisting on store credit only can be unlawful (and often escalates the complaint fast).
Can You Have A “No Refunds” Policy?
You can choose not to offer refunds for change of mind.
But you cannot use a “no refunds” policy to avoid your obligations under the Consumer Guarantees Act. In practice, the safest approach is to use wording like:
- “No change-of-mind refunds.”
- “Consumer Guarantees Act rights apply.”
That makes it clear you’re setting boundaries without misrepresenting the customer’s legal rights.
What About Sale Items, Clearance Stock, Or “As Is Where Is”?
This is another common misunderstanding: selling something “on sale” doesn’t automatically remove CGA protections.
Discounted items still need to be of acceptable quality - but “acceptable quality” is assessed in context. For example:
- If you clearly disclose a defect (e.g. “small scratch on the left side”), the customer generally can’t later complain about that exact defect.
- If you don’t disclose issues and the item is faulty beyond what a reasonable customer would expect, the CGA may still apply.
If you sell to other businesses (B2B), there are situations where you can contract out of the CGA - but this needs careful drafting and must meet legal requirements. It’s worth getting advice before relying on this, especially if you’re updating your Business Terms or sales documents.
What Should Your Returns And Refunds Policy Include (So It Actually Protects You)?
A strong policy does two things at once:
- It sets clear expectations for customers (which reduces complaints).
- It helps your team handle issues consistently (which reduces legal risk).
For many businesses, your returns/refunds policy will sit alongside your website terms. If you sell online, it’s usually smart to review your E-Commerce Terms And Conditions at the same time so everything aligns.
Key Clauses To Cover
While every business is different, most good returns and refunds policies cover:
- Change-of-mind returns: whether you accept them, timeframes (e.g. 7/14/30 days), condition requirements, and whether return shipping is at the customer’s cost.
- Faulty goods process: how customers can report faults, what proof of purchase you need, and how you’ll assess the issue.
- Remedies: when you’ll repair, replace, refund, or offer store credit (and when the customer can choose).
- Exclusions: for example, hygiene reasons (earrings, swimwear liners), perishable items, personalised goods, or digital products - but be careful: exclusions can’t override CGA rights if the product is faulty.
- Timeframes: how quickly you’ll respond, and typical processing times for refunds.
- Proof and records: receipts, order numbers, photos, and how you handle disputes.
Be Careful With “Hygiene” And “No Returns” Labels
Some businesses put blanket statements like “No returns due to hygiene” on receipts or product pages. That can be fine for change-of-mind requests, but it’s risky if it implies customers have no remedy even if the product is faulty.
A more balanced approach is to explain the hygiene restriction while still acknowledging statutory rights where applicable.
Online Stores: Your Policy Needs To Match Your Checkout Flow
If your returns policy is buried, hard to find, or contradicts what your ads or product listings say, you can end up with complaints under the Fair Trading Act.
As a practical checklist, make sure the policy is:
- easy to find (footer links, checkout, order confirmation emails);
- written in plain English;
- consistent across your website, marketplace listings, and receipts; and
- updated when your processes change (new couriers, new product types, new suppliers).
If you collect customer data to process returns (names, addresses, bank details, photos), make sure your Privacy Policy and internal handling processes are also aligned.
Common Refund Disputes (And How To Avoid Them In Your Business)
Most refund issues aren’t caused by “difficult customers” - they’re caused by unclear expectations.
Here are some of the most common disputes we see, and the simple steps that often prevent them.
Dispute 1: “Your Staff Promised Me A Refund”
This is one of the fastest ways a small issue becomes a formal complaint.
How to reduce the risk:
- Train staff on your policy and the basics of CGA remedies.
- Give staff a script for common requests (especially change of mind).
- Keep exceptions consistent (or document the reason for exceptions).
If you have employees handling sales or customer service, your internal training should sit comfortably alongside your core employment documents such as your Employment Contract.
Dispute 2: “It’s Not Faulty, It’s Normal Wear And Tear”
Sometimes customers expect “lifetime durability,” while the law focuses on what a reasonable consumer would expect for that product and price.
How to reduce the risk:
- Be accurate in product descriptions (materials, care instructions, limitations).
- Avoid exaggerated marketing claims like “indestructible” or “guaranteed forever” unless you can back it up.
- Document any assessment you make when declining a fault claim.
Dispute 3: “I Never Received The Item”
Delivery disputes are increasingly common for online businesses.
How to reduce the risk:
- Use tracked shipping and keep delivery confirmation records.
- Set clear dispatch and delivery estimates on your site.
- Make sure your policy covers what happens if parcels are delayed, damaged in transit, or lost.
Dispute 4: “I Bought It For My Business - Do I Still Get CGA Rights?”
Sometimes a buyer is a sole trader or small business and it’s not obvious whether the purchase was “consumer” or “business” use.
How to reduce the risk:
- Be clear about whether your sale is to consumers or businesses.
- If you sell B2B and want to contract out of the CGA where legally permitted, get the wording right (this isn’t a DIY area).
It can be tempting to copy a template from overseas or another brand, but a policy that doesn’t reflect NZ law can create more risk than it solves - especially for refunds language and consumer rights.
Dispute 5: “Your Terms Say One Thing, But Your Instagram Ad Said Another”
The Fair Trading Act applies to your marketing and advertising - including social media content and influencer campaigns. If your posts imply “free returns anytime” or “no questions asked refunds,” you should expect customers to rely on that.
If you use creators or partners to promote your products, having clear contractual boundaries helps (for example, expectations around claims they can make and what they must not say). In some businesses, that’s handled through a tailored Service Agreement or influencer-style agreement.
Key Takeaways
- In New Zealand, your refund obligations often depend on the Consumer Guarantees Act 1993 and whether there’s a minor or substantial failure.
- You generally don’t have to offer change-of-mind returns, but you must be clear and consistent about your policy.
- “No refunds” signs and blanket exclusions can’t override consumer law, and misleading statements can breach the Fair Trading Act 1986.
- Store credit and exchanges can be great customer service tools, but they’re usually safest for change-of-mind situations - not where a customer has CGA rights to a refund.
- A strong returns/refunds policy should set out your process, timeframes, exclusions (carefully), remedies, and how you handle faulty goods and delivery issues.
- Align your returns approach with your wider documents (like your website terms and Privacy Policy) so customers get one consistent message across your business.
If you’d like help getting your returns, refunds and exchanges policy right (or updating your website terms so they reflect NZ consumer law), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
