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Do Not Make Promises to Consumers that Cannot Be Kept: Look Out For Consumer Litigation For Failing to Honor Refund Policies

Posted: June 3, 2020

Since the outbreak of COVID-19, we have seen numerous class action lawsuits filed against companies for changing their refund policies to ones that have a negative impact on consumers or for not giving full monetary refunds for cancelled events or closed venues (previous blogs can be found here and here). Airlines, Ticketmaster, StubHub, Magic Mountain, and the Office of the Commissioner of Baseball are some of the entities currently defending these lawsuits. More companies could soon be defending against these types of claims, such as retailers that no longer allow the return of health, beauty, wellness, and pet products, and travel companies that have retroactively amended their refund policies to avoid issuing full monetary refunds for cancelled trips.

The question that companies are asking now is what policies will be the next target of consumer litigation. One possibility is companies that claim they will provide a full refund to consumers, but fail to do so. For example, many consumers have complained that they have not received monetary refunds from Groupon despite its policy that it will issue a refund for certain travel arrangements and cancelled events.1 Likewise, some travel companies have stated that it will take approximately one month to issue a refund, and there has not yet been sufficient time to know whether these companies will fulfill this assurance.2 This refund issue is not limited to the travel industry. There have also been complaints filed with the Better Business Bureau concerning online companies that promised to provide a refund after failing to ship purchased goods, but never actually issued the refund.3

If retailers and hospitality companies fail to stick to the refund policy that was effective at the time of the consumer’s purchase, they might find themselves on the sticky end of a class action that will cost them as much, or more, to defend the claims as it would to comply with the refund or cancelation policy.

[1]  See Linda Wagner, “Groupon customers frustrated when site won’t give refunds for concerts canceled by COVID-19” (June 1, 2020), https://fox4kc.com/news/problem-solvers/groupon-customers-frustrated-when-site-wont-give-refunds-for-concerts-canceled-by-covid-19/; see also a selection of posts on Twitter: “Honor your refunds! We don’t want Groupon bucks!” (bedroom_eyezzz May 28); “NOT HONORING DEALS AND WONT ISSUE REFUNDS DURING PANDEMIC!"(Dawn Blaschick May 28); “Groupon thinks that putting a credit on your groupon account is a refund.  Groupon bucks is not a refund.” (Jason Robey May 27). 

[2]  See,e.g., Vrbo, https://help.vrbo.com/articles/Can-I-receive-a-refund-for-my-cancelled-reservation (“refunds will take 3 to 4 weeks to be applied to your account.”). 

[3]  See, e.g., “BBB Warning: Customers in 13 states ordered from pop-up website, failed to receive goods or refunds” (May 22, 2020), https://www.bbb.org/article/news-releases/22477-bbb-serving-north-central-texas-warns-pop-up-website-charged-customers-for-essential-items-during-coronavirus-outbreak-failed-to-deliver-and-disappeared.