Is a “no refund” policy on deposits legal?

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The good news for consumers is that the Consumer Protection Act makes blanket “non-refundable deposit” policies illegal.

Consumers can cancel a booking of any kind and get a refund of what they’ve paid, minus a “reasonable” cancellation fee.

Given that “reasonable” is open to interpretation, the supplier should spell out their policy to whoever is paying – in writing, in the form of a sliding scale of refunds, from 100% if the consumer cancels very soon after making the booking, to zero if they cancel at the last minute.

And vendors such as wedding venues must prove the monetary loss for a missed opportunity, according to the Consumer Goods and Services Ombud (CGSO).

In other words, it can’t be a thumb-suck. They must show how they calculated what they are charging for their losses.

Necessarily, the higher the likelihood of the venue being able to find a booking to replace the cancelled one, the bigger the refund should be.

To put it in legal-speak, there needs to be a fair balance between the competing interests of the venue and of the booking party.

So, I had two local case studies illustrating this point, but for reasons known to one of the photographers, I’m postponing telling that story for now.

That leaves the case of Chantal, who was a bride-to-be until the wedding was called off, and things have turned a bit nasty hence she asked me to refer to her only as Chantal.

In January, Chantal made a booking with Nifty50 Photographers of Ballito for an October wedding.

By April, when she cancelled the booking, she’d paid R7,500 of the R10,700 quote for the photography.

But when she asked for a refund, she was pointed to the terms and conditions which read: 

“A full refund of the booking fee will only be done should the client, or Nifty 50 Photography cancel within 21 days of payment of the booking fee. After that, no parties are allowed to cancel as a payment acknowledges this agreement as binding in the South African court of law.”

Not so. A company’s terms and conditions are invalid if they don’t comply with the law.

So what would a reasonable cancellation fee be in this case? How much of that R7,500 should Chantal be entitled to?

Well, she booked in January for a wedding ninth months later, and cancelled in month three, leaving six months to function date… a decent amount of time for a photographer to get another booking.

To my mind, Chantal should be refunded no less than 75% of what she’s paid. In other words, a cancellation fee of 25% of what she paid.

No can do, said Nifty50’s Rithesh Sathnrain - he claimed that he’d turned down “more than two bookings” for that date in the three months between her making the booking and cancelling.

The “best” he could do for her was give her a 30% discount on the balance owing on the full quote, he said.

I ran the case past acting CGSO Magauta Mphalele, who said the six months’ gap between Chantal’s cancellation and the original wedding date “would possibly provide the photographer with enough time to get a replacement booking but that any costs relating to finding a replacement could be deducted from that R7500 if those costs could be proved.

“Since this is not a formal complaint lodged with our office, I am not able to make a recommendation, but the consumer is always welcome to complain about our office,” she said.

I’m happy to report that I had a discussion with Ritesh Sathnrain about the CPA as it relates to the cancellation of bookings, and he said he’d reconsider his no-refund stance in Chantal’s case and revise his current policy to be more in line with the CPA.

Then he added: “I feel that the CPA should make provision for small business and take into consideration that when a client pays a booking fee to book a specific date and agrees to the terms and conditions there should be more grace on the companies side as it takes us twice as much time than a large business to re-coup the sale and cost of sale.”

It doesn’t work like that if you’re in business, you need to comply with the CPA whether you’re tiny or huge.

So to the suppliers, if you’ve got a no-refunds policy on cancellations, best, you revise that asap, and to consumers, please, please, please check that if you need to cancel a booking shortly after making it, you’ll get most of your money back. And the time to check on that is BEFORE you sign the contract and pay that deposit.

And NEVER pay the full amount up front.

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