Can online retailer refuse to ship item and then charge a restocking fee?

June 10, 2015 19:20 by Consumer Ed

Dear Consumer Ed: 

I recently purchased a pool cover online.  My credit card was charged immediately.  Two weeks later, without any notification, the company refunded 95% of the purchase price.  When I discovered this, they told me they kept 5% because they don’t ship to where I live. Is that legal?

Consumer Ed says: 

Likely not.  Generally, a company must sell goods as advertised, and have a reasonable supply of those goods available, subject to certain disclosures.  At the very least, a company must disclose any limitations as to the availability of its inventory (including whether it can actually be shipped to a purchaser’s location).  Even though the company selling the pool cover may not be out of stock, the fact that it cannot ship the product to you is a limitation that, had you known of it, you certainly wouldn’t have ordered or paid for the merchandise.  Therefore, this means the limitation was one the company should have disclosed before you completed your transaction.   When you purchase an item over the Internet, it is assumed that the seller will ship the item to you within a specified time, or, if no time is specified, within 30 to 50 days depending on the method of payment.  If shipment is delayed and the seller cannot ship to you within this time—or in your case, cannot ship to you at all—the seller must give you an option to cancel your order and receive a full refund.  Because you paid by credit card, you should receive your refund within one billing cycle for the full amount paid.  This means 100%, not the 95% returned to you.  Had you paid by cash, check or money order, you should have received the refund within 7 business days.

The company may tell you that the 5% it retained covers a restocking fee, or other shipping and handling costs, but you are likely protected. First, any such fees must be displayed clearly and conspicuously on the company’s website, and in a manner that ensures a shopper will see it before the purchase is completed.  If the company didn’t sufficiently disclose these fees, it may be in violation of Georgia’s Fair Business Practices Act. The same could be said if the company knew at the time of your order that it did not ship to your location, and didn’t disclose this on its website.  Even if the company could ship the item to your location, any restocking fees or shipping costs may still be unfair if there is no evidence the company actually attempted to ship the pool cover.  If the seller neither placed an order with a manufacturer, nor took affirmative steps to ship the pool cover to you, then there’s no reason for any costs to be charged to you at all (i.e., if the company’s stock never left, then there’s no reason to charge you to restock it).  For more information, you may want to view our previous Consumer Ed column regarding restocking fees.

If, going forward, you cannot resolve the problem directly with the company, there are several options available to you.  Because you paid with a credit card, you may be able to dispute the remaining charge with your credit card company.  You could also contact the Better Business Bureau to see if they can help mediate a solution between you and the company.  Finally, you can file a complaint with the Federal Trade Commission at ftc.gov, and/or with the Office of Consumer Protection by visiting www.consumer.ga.gov (or by calling 404-651-8600).

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Can a hotel take 30 days to refund my deposit?

May 13, 2015 13:41 by Consumer Ed

Dear Consumer Ed: 

I reserved a hotel room in Georgia and paid a one-night deposit of $200 using my credit card.  A week prior to my scheduled check-in date, I cancelled my reservation.  According to the hotel’s cancellation policy, I am entitled to a refund of my deposit less a $50 fee. The hotel said it would take 30 days to process the refund.  There is nothing in the hotel’s cancellation policy about it taking that long to issue a refund.  Meanwhile, I will incur interest on this charge.  Are they allowed to take that long to process my refund, and am I entitled to be reimbursed for the interest accrued? 

Consumer Ed says: 

The short answers to your questions are yes, and no.  Under these circumstances, Georgia law generally doesn't require companies to provide refunds, nor does it require a time frame for the business to process the refunds.   However, if the business has a refund policy, then it must honor those terms.  If the hotel has a refund policy that promises refunds will be processed within a certain time frame, and if you abided by the terms of that policy, then the hotel is obligated to issue you a refund according to those terms.  You mentioned that the hotel’s cancellation policy did not specify a time frame for the refund to be processed.  If this is so, the hotel was not acting outside its stated cancellation policies.

One reason that businesses often take time to issue refunds is that they sometimes process the refunds in batches to avoid paying several transaction fees.  For example, if the business uses a merchant account to process its transactions, it may have to pay a transaction fee every time it transfers funds out of its merchant account; accordingly, it may choose to process all the refunds once in a particular period to save on the transaction fee.  Often, credit card companies charge merchants per transaction fees for charge-backs, so the hotel may have used the same reasoning to avoid paying multiple individual charge-back fees.  Along these lines, the hotel also wouldn’t be required to reimburse you for any interest accrued for the charge on your credit card while you were waiting for your refund (unless its stated cancellation policy provided otherwise).

If you booked the hotel through a third-party website, you should also consult the website’s cancellation and refund policy.  For example, Orbitz.com provides that your refund should post to your credit card within 7 days after cancellation.  Additionally, some credit card companies may offer trip cancellation insurance to compensate you for the losses.  In circumstances where the business keeps a deposit, consumers who pay with a credit card can also dispute the charge for the deposit with the credit card company—but the decision as to whether a refund would be granted would then be up to the credit card company.  The bottom line, however, is that in Georgia, there’s no formal legal right to a refund of a hotel deposit, absent a written policy granting you that right.

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Will my debit card be rejected if there are insufficient funds in my account?

April 30, 2015 20:20 by Consumer Ed

Dear Consumer Ed:

Are banks obliged to reject attempts to use a debit card when there are insufficient funds in the account?

Consumer Ed says: 

When you use your debit card to make a purchase or other electronic payment for an amount greater than the balance in your checking account (thus creating an overdraft), the bank can choose to make the payment, or not.  In 2010, the Federal Reserve issued new rules regarding fees banks charge for overdrafting debit card and ATM transactions.  Under the old rules, banks were permitted to automatically enroll their customers in their standard overdraft practices.  These overdraft practices typically involved charging customers a fee to provide the additional funds.  However, under the new rules, the bank must obtain the customer’s permission to apply its overdraft practices to the account before charging a fee, which the customer typically provides by agreeing to a notice sent by the bank. 

If you don’t opt in to overdraft procedures and you attempt to make a purchase or withdrawal which would overdraft your account, the transaction will typically be declined, but you won’t be charged an overdraft fee.  However, if you’ve opted in to overdraft protection, your account can be overdrafted, and the bank can then charge you the fees set under the terms in your opt-in agreement.  Be aware that these fees can mount up quickly, so make sure you know what you’re agreeing to.

When setting up new accounts, pay careful attention to the documents you sign.  If you prefer your card to be declined and your account not to be overdrafted, don’t sign the opt-in form that will enroll you in the bank’s overdraft protection plan.  If you’d like the overdraft protection, then sign the form.  If you’ve previously enrolled in the overdraft program but no longer wish to be, you can contact your bank and opt-out of their overdraft policy.

Again, these rules apply to debit card and everyday transactions; they don’t cover checks and automatic bill payments.  Banks can still automatically enroll their customers in standard overdraft procedures for payments made using those methods.

In sum, to avoid overdraft charges, remember:

  1. Do not sign an agreement with the bank authorizing overdraft charges.
  2. Keep track of the money in your account by keeping your check register up to date.
  3. Make sure to record your electronic transactions as well.
  4. Make sure to take into account automatic bill payments.
  5. Review your account statements each month.
  6. If you do overdraft your account, deposit money into the account to cover the overdraft and any fees in order to avoid any additional charges.
  7. You can link your account to a savings account. You may be charged a transfer fee when overdrafting your checking.
  8. You can link your account to a credit card you have with the bank.  You may be charged a cash advance fee when overdrafting your checking.

 
If you have a complaint about the fees charged by your bank, you can try to resolve the problem directly with your bank.  If you make no headway on your own, you may want to file a complaint with a federal or state agency that enforces consumer banking law.  If your complaint involves a Georgia state-chartered bank or credit union, you can file a complaint with the Georgia Department of Banking and Finance (http://dbf.georgia.gov); otherwise, you can contact the Consumer Financial Protection Bureau to file your complaint (http://www.consumerfinance.gov/complaint).

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