Is there such a thing as a non-refundable deposit"?

LISTEN: Is there such a thing as a non-refundable deposit?

It’s been almost six years since the Consumer Protection Act made it illegal for companies to impose a blanket “non refundable deposit” policy on their customers.

Deposit slip
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Listen to Wendy's on-air segment or read the full story below the podcast.

But the practice remains rife as many who have had to cancel a wedding or holiday accommodation booking have discovered.

When it comes to weddings, couples are usually made to pay deposits to many service providers - the venue, photographer, caterer, decor person, dressmaker etcetera, which can add up to a hefty outlay. But when couples are planning a wedding, mostly the last thing on their minds is whether or not they’ll get their deposit refunded to them if the wedding doesn’t go ahead.

So the words “cancellation policy” get drowned out by talk of table settings, wedding songs and bridal packages.

Jade of Morningside’s story

Jade was due to get married on June 17,  and she’d paid deposits to several service providers totalling around R50 000.

She heard the words “non refundable’ deposit from one of them, she says, “but that didn’t phase me, because there was no way we were going to cancel…”

When her wedding was called off last month, she got a mixed response when she contacted those service providers about getting her deposits back.

“Cancelling a wedding is never fun,” she said,  “but the catering company, Blue Strawberry, and the venue, Orchards in the Midlands were absolutely phenomenal about assisting and supporting us, both refunding our deposit."

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But it didn’t go so well with the photographer, who initially refused to refund a cent of the R8700 deposit she’d been paid, arguing that her invoice stated that deposits were non-refundable.

But that’s not complaint with the CPA, which states that a consumer may cancel an advance booking of any kind and get a refund of what they've paid, minus a "reasonable" cancellation fee.

Given that "reasonable" is very open to interpretation, the supplier should spell out their policy in detail to whoever is paying - in writing, in the form of a sliding scale of refunds, from 100% to zero. 

The deposit system is meant to be fair to, and protect, both parties.

”It can be particularly difficult for vendors to prove monetary loss for missed opportunity," says Ombudsman for Consumer Goods and Services, Neville Melville. "But they need to show how they calculated a fair charge for their losses."

So their cancellation fee can't be a thumb-sucked amount.

Ultimately, the greater the likelihood of the venue or caterer being able to find a booking to replace the cancelled one, the bigger the refund should be.

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So no service provider can have a blanket non-fundable policy on deposits.

The photographer argued that she was entitled to retain Jade’s entire deposit because she cancelled the booking six months before the wedding, and most people make wedding bookings nine months in advance, meaning that she was unlikely to get another booking. She also revealed that she’d spent the money.

But just as I was about to tackle the photographer about her stance, she appeared to have a change of heart and refunded Jade her the deposit in full.

But she would have been justified in retaining at least a third of it, given the timing of the cancellation. As I said, the deposit is a mechanism meant to protect both parties in the event of cancellation.

The good news is that service providers involved in this story have made some changes to their contracts with regard to the refund of deposits.

And so should all the rest.

Wendy's advice on securing your deposit

So to those planning a wedding, the advice is simple - don’t only compare the prices of wedding venues and suppliers, but their cancellation policies, too, bearing in mind that non-refundable deposits are not legal.

Make sure there’s a sliding scale setting out how much of your deposit you’ll be refunded, depending on when you cancel.

Some insurers sell wedding cancellation insurance, and the upfront cost is minimal compared to what you may lose if the wedding’s cancelled, but as always, you must read the small print: the policy may cover wedding cancellation due to illness, death or venue closure, but in most cases, not change-of-heart cancellations.

If you do cancel a wedding or any other function booking, or holiday accommodation, and you’re given a raw deal with deposit refund, you can get the Ombudsman for Consumer Goods and Services involved - they are well used to dealing with this phenomenon, and will arbitrate fairly, and no cost to you. 

CLICK HERE to lodge a complaint with the Consumer Goods & Services Ombud. 

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