Be Careful About Changing Refund Policies Under Covid-19

Few businesses are immune from the economic effects of the coronavirus pandemic, but among those that have been hit the hardest are business involved with sports, concerts, performances, and other live events. According to StubHub, more than 23,000 events have been canceled, rescheduled, or postponed over the past few weeks in the US alone.

As consumers look for refunds, many businesses are reviewing their policies to determine whether there are creative ways they can stop cash from going out the door. On March 12, for example, StubHub announced that consumers had the option of either getting a refund for a cancelled event or a coupon for 120% of the original ticket price. Apparently, the option was well-received, and many consumers opted for the coupon.

On March 25, StubHub changed the terms of its policy and limited the availability of the option, stating that if the event is canceled and not rescheduled, you will get a refund or credit for use on a future purchase, as determined in StubHub’s sole discretion (unless a refund is required by law).” Other communications omitted that parenthetical, suggesting that all consumers would get a coupon, rather than a refund.

It only took about a week for the first lawsuit to be filed. In a class action filed in Wisconsin federal court, a plaintiff argues that by retroactively changing its refund policy, StubHub breached its contract with consumers and violated California false advertising laws. Among other things, the plaintiff is asking for refunds for class members, which could exceed $5 million.

Lawmakers are looking at this, too. In February, the House Energy and Commerce Committee invited representatives from six companies to a hearing to discuss issues in the live event ticket industry. And this month, Committee Chairman Frank Pallone called on companies in the industry to fully reimburse all consumers affected by canceled or postponed events,” rather than issue credits.

Although it’s too early to tell how this issue will play out, there is likely to be scrutiny on how companies handle refunds across a range of industries. If you are considering changes to your refund policy, think carefully about what promises you’ve made to consumers and whether your terms provide flexibility for changes. Saving money on refunds can be a good thing, but those savings have to be balanced against the legal and reputational costs of a bad decision.

Tags: Coronavirus