Cooling off / change of heart

[c_karsan]

I have found a scenario in the distance selling act for e-commerce (UK)-where you give people time to change their mind regarding the product that they have purchased through your store.

 

It is possible in most shops to order something, pay for it then almost immediately cancel the order.

You may think so what? but if the payment has taken place then you have already paid a transaction charge and this can be 4.5% with worldpay. So if someone (competitor or grudgeholder) decides to order the max amount charges onto the card then cancels you are left with potentially 100's of ???'s worth of transaction bills.

 

for us small shops its not so easy to make that money back, so I was wondering if anyone has put a clause in whereby they state they refund back less the transaction charge or if anyone knows this is legal to do so.

 

Cheers

[avoisin]

I've definately seen some people charge a 15% restocking fee for returned merchandise, even if totally unused and in perfect condition. I assume that percentage is at least in part to cover the transactions fees, and I know at least that much is legal.

 

I'm guessing what you describe might fall into the same category. This could especially be true if you're a drop-ship vendor, where you don't even really get involved in the product itself.

 

I think you'd be fine charging a fee, just be kind a put up appropriate messages during the checkout process giving them a warning about cancelling.

 

Scott

[c_karsan]

Thanks scott, Ive done a bit more digging around to try to clarify

 

I've taken these paragraphs from the distance selling regulations of 2000. This is UK directive can be found here in full for anyone interested (i suppose everyone should be interested whose in the UK) Distance Selling Regulation

 

First clause 10.

"Right to cancel

10. - (1) Subject to regulation 13, if within the cancellation period set out in regulations 11 and 12, the consumer gives a notice of cancellation to the supplier, or any other person previously notified by the supplier to the consumer as a person to whom notice of cancellation may be given, the notice of cancellation shall operate to cancel the contract.

 

(2) Except as otherwise provided by these Regulations, the effect of a notice of cancellation is that the contract shall be treated as if it had not been made."

---other paragraphs left off---

 

"Recovery of sums paid by or on behalf of the consumer on cancellation, and return of security

14. - (1) On the cancellation of a contract under regulation 10, the supplier shall reimburse any sum paid by or on behalf of the consumer under or in relation to the contract to the person by whom it was made free of any charge, less any charge made in accordance with paragraph (5)."

 

heres paragraph (5)

 

"(5) Subject to paragraphs (6) and (7), the supplier may make a charge, not exceeding the direct costs of recovering any goods supplied under the contract, where a term of the contract provides that the consumer must return any goods supplied if he cancels the contract under regulation 10 but the consumer does not comply with this provision or returns the goods at the expense of the supplier."

---other paragraphs left off---

 

It implies that you must reimburse the money free from any charge and treat as if no transaction has occurred but then it seems to say I can make a charge if it is costing me to process the refund but nothing about cc transaction charge, which could potentially be fairly significant cost when refunding a credit card payment. It all depends what it means by direct costs.

 

Looking at my other competitors websites nobody has a restocking fee on change of heart cancellation so I am thinking it is not legal to do so here. Time to ask my solicitor I think.

 

Although this isn't a widespread concern it could be for small retailers and its better to get it sorted out before people start taking advantage.

 

For example if you process 100 cancellations of ?100 average refunds in one year that is a cost to you of about ?470 if using worldpay. how many sales would it take to make that sum back up? for me probably around 80-100.

 

good trading all.

 

Regards Chet

[secretuser]

I am a bit puzzled by these transaction fees. Once an order is cancelled, you refund the money and the transaction fees are reversed.

 

I use both PayPal and a merchant account, and both would refund the fees if you refund the money from either a returned order or a cancelled order.

 

I find it hard to believe there are payment processing companies that keep the commission, even if you refund the money.

[♥yesudo]

I don't think under the distant selling act you can let a customer bear any charges other than the cost to them for posting the item back to you - but phone your local trading standards office for confirmation/clarification.

 

Also in relation to worldpay look at this feature - which doesn't cost anymore:

 

http://www.fastcart.co.uk/pre-authorisation.php

 

It means some manual work and monitoring - but eats into the distance selling time period.

[Guest]

I am a bit puzzled by these transaction fees. Once an order is cancelled, you refund the money and the transaction fees are reversed.

 

I use both PayPal and a merchant account, and both would refund the fees if you refund the money from either a returned order or a cancelled order.

 

I find it hard to believe there are payment processing companies that keep the commission, even if you refund the money.

<{POST_SNAPBACK}>

 

yes they keep the fee UNLESS you void the transaction. Which usually needs to void it before it gets settled. Once settled, you pay the transaction fee. It might be different for some processors but I believe most would keep the fee. Imagine a situation where you refund a portion of the amount? like if the customer returned 1 of 3 items. You think the merchant will re-imburse part of the fee? no way, you are still using their infrastructure and you need to pay to use it.

[emanresu]

Note for Worldpay users.

 

Yes the do charge 4.5% for transactions that are cancelled under the DSR. However there is an option on Worldpay to pre-auth i.e the money is held for 7 days (same time as the DSR) . There is no payment until the shop owner logs into to authorise the transacation

 

So if the customer cancels or in our case its was fraudulent transactions from Russia, Nigeria , Morocco etc we did not pay the 4.5%

 

It adds to the payments administration but you then know all your orders are valid

[c_karsan]

I was told about the pre-auth function when I spoke to worldpay. Either that or I might as well get my own cc processing merchant account(which would be more cost effective in the long term).

 

I also explained the scenario to a local trading standards officer before I came on this forum and was told since this is a relatively new law it was a bit of a grey area.

 

Im waiting for another phone call regarding!

[Guest]

I was told about the pre-auth function when I spoke to worldpay. Either that or I might as well get my own cc processing merchant account(which would be more cost effective in the long term).

 

I also explained the scenario to a local trading standards officer before I came on this forum and was told since this is a relatively new law it was a bit of a grey area.

 

Im waiting for another phone call regarding!

<{POST_SNAPBACK}>

 

Two things here. I also use PayPal, and if refunded within 60 days the transaction fees are reversed and it costs me nothing. I have a no-hassle policy on my static HTML store (hopefully soon to be in OS Commerce) whereby I will refund money for any reason within 30 days. Since I don't have to pay the transaction fees, and my suppliers all take stock back within 30 days, it's no skin off my teeth (i.e., "not a problem" for those who don't know that english idiom).

 

Secondly, this is a legal question which you should direct to a solicitor. They are going to be the ones to defend you should you be challenged. While advice given here is well-intended, I wouldn't give it any legal credence.