Consumer rights: what new business owners need to know

Setting up an online store or opening a shop? Make sure you're aware of the main consumer rights so you can trade with confidence.

When taking those first steps in innovation and entrepreneurship and writing a business plan, it's easy to get carried away with the excitement of a new venture.

However, don't overlook the importance of understanding your customers' consumer rights - as well as those that apply to retailers and service providers like yourself.

Businesses that break consumer law can be fined by the Competition and Markets Authority (CMA), so know the facts and trade with confidence.

We've identified some of the main elements you need to know about the Consumer Rights Act 2015 and dispel some myths.

Physical product sales - consumer rights

Whether that's home accessories or party decorations, if your business sells products, it pays to swot up on the Consumer Rights Act.

Introduced in October 2015, it covers physical purchases and online shopping.

It legally binds businesses to provide goods that are as described, fit for purpose and of a satisfactory quality for the price paid.

If a product doesn't meet all of these requirements, consumers have the right to a refund - but only if a claim is made within 30 days.

After that time, and up to six months after the purchase, as a trader, you have the right to repair or replace a product before offering a full refund. After six months, you need only to give a partial refund.

Customers can't claim if they were aware of a fault or defect before purchasing an item or if they've caused any damage themselves.

The Consumer Rights Act differs for perishable goods when the refund period is determined by how long you can reasonably expect products to last.

On food items, this is usually the use-by date.

Physical product sales - myths

Myth: Customers are allowed to change their mind.

Truth: Shoppers can't just go home and decide, for example, that a lampshade doesn't suit their bedroom or a cushion cover is the wrong size. If there's nothing wrong with a product, legally, you don't need to offer a refund. You may, however, make it your own returns policy to do so or allow your customer to choose an alternative item.

Myth: A customer can receive a refund for earrings.

Truth: As a trader, you may specify that non-faulty goods can be returned if unused and in the same condition as when they were bought. You may also wish to be specific about packaging and wrapping. However, it's common practice not to refund earrings, make-up, toiletries, and underwear for hygiene reasons.

Online product sales - consumer rights

If you're a registered business and sell products online or over the phone, perhaps hand-crafted cards or quirky dog toys, be aware that your customers have more rights than shoppers on the high street.

As well as being covered by the Consumer Rights Act, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 state that anyone making a distance purchase has a 14-day 'cooling off' period so they can inspect the goods.

If they decide they don't want it - for whatever reason - the customer is entitled to a full refund.

Also, note that this timeframe starts the day after the delivery is made, and the customer has another 14 days to return the item to you once they notified you of their intention to return the goods.

Exceptions include custom-made items, such as a made-to-measure blind, and personalised products, such as a bespoke engraved bangle and perishable goods such as food or flowers.

As a retailer or trader, you can deduct an amount from any refund if you believe the value of the goods has been reduced as a result of overhandling by the customer.

Restocking fees should be made clear in your business' terms and conditions.

Online product sales - myths

Myth: The courier you use to deliver your goods is responsible if items go missing.

Truth: This is not the case. As a trader, you are responsible for any goods you sell online until they are in the physical possession of your customer. If leaving goods with a neighbour or in a safe place, make sure you have the buyer's permission.

Myth: The customer always has to pay return charges.

Truth: Within the 14-day cooling-off period, delivery charges to the customer are actually down to you, so you will have to refund your customer for standard delivery. After that time, you need only to pay delivery costs if the goods are faulty. If a customer doesn't want an item, and you've agreed for them to return it to you, then return postage is their responsibility.

Services - consumer rights

If you offer a service to customers - perhaps you're a hairdresser or own a clothes alteration business, for example - under the Consumer Rights Act, you're expected to perform this with reasonable care and skill, carry it out in a reasonable time and charge a reasonable price.

Individuals may have different ideas about what constitutes 'reasonable', so if prices aren't listed, provide a quote and, if appropriate, an estimated timescale.

If you have an unhappy customer who feels the service you have provided does not meet the above criteria, as a business owner you should carry out the service again or fix the problem at no extra cost or inconvenience to your customer.

Alternatively, you could offer a reduction in the price.

The customer must inform you of their grievance soon after receiving the service, and they can't suddenly change their mind.

If the service was good enough for them at the time, legally they can't later ask for a discount or for the service to be done again.

The Food Standards Agency offers guidance for restaurant and café owners.

Services sales - myths

Myth: Only written service agreements are legally binding.

Truth: If you agree to perform a service, and a customer is happy with the price and timescale, the information you provide is contractually binding - whether it's written or spoken - so don't make an elaborate sales pitch if you know you can't deliver. For peace of mind, put important details in writing, so there's no dispute at a later date.

Myth: A customer can cancel your services at any time.

Truth: If someone has booked your services online or over the phone, the 14-day cooling-off period applies. They can cancel for any reason and are legally entitled to get any money they've paid back so long as the work hasn't started. However, there would be no cooling-off period if the customer visited your shop or premises to arrange the service.