Rules written before the Internet existed are due for an update, the agency says, including a change that will get credit card users faster refunds for merchandise
The regulations are designed to update existing rules that date to 1975, which sought to ensure that consumers ordering goods received their merchandise promptly or else received their money back.
Previously, retailers had to refund money onto credit cards within one billing cycle, or about a month. Now, they have to do that within seven days. The FTC also clarified the regulations to apply to Internet purchases and to protect consumers who pay with debit cards and gift cards — newer forms of payment that were not previously covered. Refunds to consumers who use those payment methods must also be processed within seven days.
The refund rule applies to shipments that are delayed or to orders in which the customer has requested a refund before the merchandise has shipped. “It makes sure that they’re going to get prompt service — as prompt as the technology allows today,” said FTC spokesman Frank Dorman.
Dorman said he did not have statistics on the number of complaints to the FTC regarding timeliness of refunds.
Associations that represent retailers largely support the changes to the regulations to bring them up to date. In comments submitted to the FTC, the National Retail Federation and the Direct Marketing Association said their members already issue prompt refunds and that retailers and consumers benefit by having standard rules apply uniformly to orders placed by phone, mail and the Internet.
These rules make good business sense and are well-integrated into the business practices of our members,” said the Direct Marketing Association, in written comments to the FTC.
The National Retail Federation suggested that refunds for credit card and debit card orders be required within one billing cycle, but that it supported efforts to modernize the regulations. NRF spokesman Craig Shearman said he was not was familiar enough with the regulations to comment.
The main thrust of the FTC’s rule, known as the Mail or Telephone Order Merchandise Rule or “30-day rule,” remains the same: Retailers are required to ship merchandise within the time frame they advertise or within 30 days if no time frame is specified. If they cannot meet that requirement, they must obtain the consumer’s consent to delay the shipping and or refund payment.
But when regulators wrote the rules, they did not foresee the rise of e-commerce and new payment options.
In the past 10 years alone, U.S. Internet purchases have increased sixfold, to $47.5 billion in the second quarter of 2011, according to the Commerce Department. E-commerce accounts for just under 5 percent of all U.S. retail spending.
The FTC is accepting comments on the new proposals until Dec. 14.