Is It Legal For Businesses To Enforce Non-Refundable Deposits?

Be it an impulse decision or the result of a pushy salesperson, we've all put an initial deposit on an item and then changed our minds about it. Some shops will refund the money back to you without any hassle. But there are others that have non-refundable deposit policies. Is it actually legal for them to keep your money even though you don't want their goods any more?

Photo: Flickr, Lynn Friedman

For larger purchases such as a house or a car, you would usually be required to sign a contract stating your intention to buy, so whether or not a deposit associated with them will be given back to you if you change your mind will depend on the terms and conditions of the contract.

But if this was a coat that you've put on lay-by, the shop you've made this arrangement with is allowed to charge a termination fee or keep the deposit you've put on it if you decide to back out of the sale. While you may think this is unfair, the reality is the seller needs to recoup the cost of you changing your mind. The coat could have been bought by somebody else in the time it was reserved for you and it may now have to be sold because it isn't in season any more.

There is a maximum amount businesses are allowed to charge you for defaulting on a purchase and that varies from state to state. For example, in Queensland, the non-refundable deposit fee cannot exceed $100 while in NSW, the seller may be entitled to retain all of your deposit.

According to the NSW Fair Trading website: “The actual amount the trader is allowed to retain depends on the circumstances. This money compensates the trader for the time and expense devoted to the transaction, but should not be so high as to constitute a penalty.”

But if a store didn't expressly stipulate that there would be a termination fee or a loss of deposit if you cancel on a layby, then you are legally entitled to get your money back. By Australian law, all terms and conditions relating to laybys or deposits must be laid out in writing in easy to understand language, including any termination charges.

Did you just catch yourself wondering if something was legal or not? Let us know and we may be able to answer it in our next Is It Legal? feature.


Comments

    I had a situation where a dog sitting service wouldn't pay me back my deposit.
    They were a service who facilitated people to look after your dog while you are away. After meeting one of their dog minders I paid the deposit only to have their minder back out.
    After they tried to hook me up with 2 alternatives (1 of which backed out before I was able to meet them) I decided against using their service and went with a regular dog kennel.
    They refused to pay me the full deposit.
    I reasoned that my paying it had been on the condition that it was secure the minder I met (who backed out). They still refused.
    I took the case to VCAT (I'm in Victoria) and they caved in almost immediately.

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