Faulty product refund: customer disputes anyway

You did the right thing. A customer reported a faulty item, you apologised, you sent a replacement or issued a refund. Two weeks later a notification lands: the same customer has filed a dispute with their bank for the same order. Now you are out the money twice, or you are being asked to defend a sale you already made good on. It feels unfair, and it is more common than most merchants expect.

A faulty product refund dispute is a chargeback filed by a customer whose item was faulty, where the customer either did not notice the remedy, did not wait for it, or filed in parallel. In Australia the consumer guarantees mean a faulty item entitles the customer to a remedy, so the question is rarely "was there a fault?" and almost always "what did you do about it, and can you prove it?" This guide covers what the ACCC says you owe, how a fault dispute plays out on Shopify Payments, how to stop paying twice, and what evidence wins or loses these cases.

This guide is for you if:

A customer reported a fault, you gave a refund or replacement, and they disputed anyway.
A customer disputed before you had a chance to respond to their fault report.
You want a process so a fault claim never turns into a double loss.

Last updated: 9 October 2026. Written by the ChargeFix team. Reviewed against sources on 9 October 2026.

The 30-second answer (TL;DR)

If a consumer guarantee fails, the ACCC says you must offer a repair, replacement or refund, and you cannot send the customer to the manufacturer.
A refund you already issued is your strongest evidence. Shopify's chargeback reasons page suggests proof of an earlier refund for the credit not processed reason.
Refunds generally cannot be issued after a chargeback is filed, but can for an inquiry. A full refund ends an inquiry. A partial refund does not.
If you refunded and the customer still disputed, respond with the refund record and do not issue a second refund. If you refunded after the chargeback opened, the outcome depends on what you can show.
The deadline is usually 7 to 21 days after filing. Files must be PDF, JPEG or PNG, up to 2 MB each and 4 MB in total, one per evidence type, with no links.
The dispute fee is A$25, and every dispute counts toward your chargeback rate.
Prevention beats cure: confirm every remedy in writing, with a date and a method, the same day.

Quick note: The most expensive mistake in a fault dispute is the double payment. A customer receives a refund, the bank also reverses the charge, and the merchant is down twice. The fix is not to argue. It is to show the first refund clearly and early.

Fault dispute outcomes at a glance

Situation	What it means	What to do
Fault reported, refunded, customer still disputes	Customer may have been refunded and also filed	Submit refund proof, do not refund again
Fault reported, no reply yet, customer disputes	Customer did not wait	Reply, refund if due, and respond to the dispute
Fault reported, replacement sent, customer disputes	Customer may say replacement was not received	Submit shipping and delivery proof for the replacement
Inquiry opened before any remedy	Refund still possible	A full refund ends the inquiry
Chargeback open, fault is genuine	Refund not possible	Weigh accepting against responding
No fault found, customer disputes	Possible change of mind	Show the item matches and the policy applies

What do you owe when a product is faulty in Australia?

The ACCC's repair, replace, refund, cancel page (dated 21 July 2026) says that when a consumer guarantee fails, you must offer a repair, replacement or refund. You cannot send the customer to the manufacturer. What you owe depends on whether the problem is major or minor.

For a major problem, the customer chooses a refund or a replacement. There is no deduction for use, and the refund goes to the original payment method. The customer may also keep the item and receive compensation. A problem is major if the item is unsafe, significantly different from its description or sample, has a serious fault (or several smaller faults that together would have stopped a buyer purchasing it), or cannot be used for its purpose and cannot be fixed quickly.

For a minor problem, you must repair it free of charge. A refund or replacement is not required, though you may offer one. If you fail to fix it within a reasonable time, the customer can have it fixed elsewhere and claim the cost, take a refund or replacement, or keep the item and receive compensation. Our guide to major vs minor failure walks through the classification.

Under the consumer guarantees, the ACCC also says customers do not need original packaging, you may ask for proof of purchase, you must pay collection for bulky items, and you must reimburse reasonable return costs if a fault is confirmed. If no fault is found, you may charge collection and inspection costs, with a reasonable estimate given in advance.

Why does a customer dispute after you have fixed it?

Understanding the reason tells you how to respond. In our experience the causes fall into six groups. These are patterns, not statistics, and we do not have data to give percentages.

Parallel filing. The customer contacted you and their bank on the same day, in case you did not reply.
Timing gap. You issued the refund, but it takes several business days to appear on the card statement, and the customer sees the original charge and files.
Missed message. The customer did not read or receive your email, so they think nothing happened.
Partial remedy. You refunded the item but not the delivery, or offered a replacement when they wanted a refund.
Slow response. You took too long, and the customer lost patience.
Opportunism. Rarely, a customer keeps the refund and also disputes. This is the case where evidence matters most.

The first four are almost always avoidable. A prompt reply, a clear confirmation and a note on how long refunds take remove most of them.

How long does a refund take to show up?

We could not verify bank processing times, and they vary by issuer. What you can control is the message. Tell the customer the date you issued the refund, the amount, and that the bank may take several business days to show it. Include the refund reference if your admin provides one. A customer who has this in writing is less likely to file.

How does a fault dispute work on Shopify Payments?

The dispute appears in your Shopify admin with a reason. For fault claims the reason is often "product unacceptable", which is Shopify's label for a customer saying the product was unacceptable. If the customer says they were not refunded, the reason may be "credit not processed". Shopify's reasons page suggests, for product unacceptable, fulfilment details, tracking, product descriptions and photos, and proof the customer did not try to return the item or that a replacement was sent. For credit not processed it suggests refund and return policies, proof the customer was informed, emails, an explanation, or proof of an earlier refund.

Key rules from Shopify:

The deadline is usually 7 to 21 days after filing, in your store timezone, and 11:59 PM if no time is shown. Shopify auto-submits what you have on the due date.
The issuer decides up to 75 days after submission.
A full refund ends an inquiry. A partial refund does not.
You generally cannot refund an open chargeback.
Every dispute counts toward your chargeback rate. A high rate can lead to an account health notice, a reserve or NDRP enrolment. The NDRP fee in Australia is A$25.
The dispute fee is A$25. Whether it is returned on a win is ambiguous: the resolve page says yes, the overview says it may be, depending on country.

What if you already issued the faulty product refund?

If the refund was issued before the customer filed, your evidence is straightforward: the refund record and a clear timeline. Submit the date, amount and method of the refund, the customer's fault report, and your reply. State plainly that the customer has already been refunded in full.

If the refund was issued after the chargeback opened, the position is harder. Shopify says refunds generally cannot be issued after a chargeback, so check what your admin shows. If a refund did go through, evidence of it still helps, but be careful: issuing a second refund through another route risks paying twice. Do not do that. Ask Shopify support how to treat any refund made around the time of the dispute, and keep the answer.

Illustration: an A$140 faulty item refunded, then disputed

Step	Amount	Notes
Original sale	A$140.00	Customer pays by card
Fault reported		Day 1
Refund issued by you	A$140.00	Day 2
Customer files dispute	A$140.00	Day 5, before the refund shows on the statement
Dispute fee	A$25.00	Charged on filing
Outcome if you show the refund and win	Total cost A$140.00, plus A$25.00 if the fee is not returned	Customer is out of pocket once, you pay once
Outcome if you do not show the refund and lose	Total cost A$280.00, plus A$25.00 fee	You have paid twice

The point of the table is the last row. A merchant who refunded and then lost the dispute without showing the refund has paid twice. Whether the issuer will reverse the chargeback after a refund is not something we could verify, which is why clear, early evidence matters. The figures are illustrative.

Why does a faulty product refund still end in a dispute?

A faulty product refund looks like the end of the matter to the merchant. To the customer it is a promise that has not yet landed. Until the money appears on their statement, the customer has only your word, and a bank app that still shows the original charge. Some customers file to be safe. Others file because the first reply took three days.

That is why the speed and clarity of your faulty product refund matter as much as the amount. A refund issued within a day, confirmed by email, with the date and amount, answers the customer's real question: "has this been dealt with?" A refund issued after a week, confirmed by nothing, answers it badly.

The consumer guarantees give the customer a right to a remedy. They do not give you a guarantee that the customer will wait. Build your process on that assumption.

Illustration: three stores, one fault, three outcomes

Imagine three stores each sell the same A$90 item, and each customer reports a fault on the same day. The figures are assumed.

Store	Reply time	Refund confirmation	Dispute filed?	Cost
A	Same day	Email with amount and date	No	A$90 refund, postage if needed
B	Three days	Refund issued, no email	Yes, on day 4	A$90 refund plus A$25 fee, plus time to respond
C	Seven days	Replacement offered when refund wanted	Yes, and likely lost	A$90 plus A$25 fee, no goods back

Store A did nothing clever. It replied fast and wrote the refund down. That is the entire difference.

What evidence wins a fault dispute?

Think in two parts: proof of the fault and proof of the remedy.

Proof of the fault shows you took the claim seriously and treated it correctly. Include the customer's report, any photos, and your classification.

Proof of the remedy is the part most merchants skip. Include:

Refund record. A screenshot or PDF showing amount, date and payment method.
Replacement shipment. Tracking and delivery confirmation, with the address.
Messages. Your reply and the customer's responses, with dates.
Policy. Dated, showing the fault process.
Order and fulfilment details. The original sale and delivery.
Product page at the time of sale. Especially if the claim is about description.

Put a one-page summary first. A reviewer reading your response should understand the story in thirty seconds: sale date, fault report date, remedy date, dispute date.

The summary page

A good opening paragraph reads like this:

The customer ordered on 1 October 2026 for A$140.00 and reported a fault on 3 October 2026. We refunded A$140.00 in full to the original payment method on 4 October 2026, and emailed the customer the same day. The customer filed this dispute on 7 October 2026, after the refund. We ask that the dispute be resolved in our favour, as the customer has already been refunded in full.

Plain, dated, factual. Attach the refund record and the email. Avoid arguing about the customer's motives. Our chargeback evidence checklist lists everything else, and the guide to responding to a Shopify Payments dispute covers submission.

How should you handle a faulty product refund request step by step?

Use the same six steps every time, so that nothing depends on who is working that day.

Acknowledge within one business day. Say you have the report and what happens next.
Ask for what you need, once. Usually a photo of the item and the fault, and the order number. Do not ask for more than you need.
Classify. Major, minor, or not a fault. Write one line on the order.
Offer the remedy in writing. For a major problem, offer the choice of refund or replacement. For a minor problem, offer the repair and a date.
Do it, then confirm. Issue the refund or dispatch the replacement, then send the confirmation with date, amount, method and tracking.
Close the loop. If the customer has not replied after a few days, send a short follow-up and record it.

If you handle every faulty product refund this way, your evidence assembles itself. The classification note, the remedy offer, the confirmation and the follow-up are exactly the documents an issuer reads.

Where "product unacceptable" fits

Shopify groups many fault complaints under the reason product unacceptable. When that reason appears, the evidence Shopify suggests (fulfilment details, tracking, product descriptions and photos, and proof the customer did not try to return the item or that a replacement was sent) maps neatly onto the six steps above. If you kept a record at each step, your response is mostly a matter of attaching files. If you did not, you are reconstructing it from memory under a deadline.

What if the customer says the replacement never arrived?

A replacement is a second shipment, and it can fail like any other. Send it with tracking, and treat it as a fresh delivery for evidence purposes: tracking number, delivery confirmation, address. Our post on tracking says delivered but the customer says not received covers the proof you need for that part of the story.

When should you accept instead of fight?

Accept when you owed a remedy and did not provide it. If the fault was major and you refused or ignored the customer, the ACCC guidance supports them, and a fight is likely to cost more than it returns.

Fight when you can show the remedy was provided before the dispute, or the item was not faulty and the claim is a change of mind that your policy clearly handles.

Consider the numbers. The fee is A$25 and your time has a cost. On a small order, accepting may be cheaper. On a larger order, or when your chargeback rate is a concern, fighting a clearly winnable case is worth it. Our guide on accepting or fighting a dispute sets out the maths.

We could not verify how an issuer weighs a refund record against a customer's statement, so treat strong evidence as improving the odds, not guaranteeing them.

How do you stop paying twice?

A few habits prevent most double losses. None of them need software. They need a rule that everyone on your team follows, a template that says the same thing every time, and a habit of looking at the dispute list before anyone presses the refund button. Print the list and stick it near whoever handles support, and review it once a month against your last few disputes.

Refund first, then confirm. Issue the refund in Shopify before you email. Then send an email that states the amount, the date and the payment method.

Never refund outside Shopify. If you send money by another route, such as a bank transfer, you have no record in the dispute system and the customer may still file. Refund through the payment, so the card is credited.

Check the dispute list before you refund. If an inquiry is already open, a full refund will end it. If a chargeback is open, stop and decide.

Tell the customer how long it takes. A single sentence in your template reduces filings.

Keep one thread. Reply in the same email thread so the history is in one place.

Log it. Add a note to the order with the date, amount and reason.

A refund confirmation template

Hi [name], we're sorry the item arrived faulty. We've refunded A$[amount] in full to your original payment method today, [date]. Your bank may take a few business days to show it. If you don't see it after [X] business days, reply here and we'll help. You don't need to send the item back unless we've asked.

Adjust the last line to your process. The ACCC says you must reimburse reasonable return costs if a fault is confirmed, so if you do ask for the item back, say that you will cover postage.

What if the customer wants a different remedy?

Sometimes the dispute is about the remedy, not the fault. For a major problem the customer chooses between a refund and a replacement. If you sent a replacement and they wanted a refund, you may not have given them the choice the guarantees allow. For a minor problem you choose the remedy, but if you fail to repair within a reasonable time the customer can take a refund or have it fixed elsewhere.

When in doubt, ask. "Would you like a replacement or a refund?" costs you one message and avoids the argument. Record the answer. If the customer did not reply, record that too and say what you did next.

What if the fault was caused by the customer?

Some claims involve damage that looks like misuse. The ACCC page we read does not set out the test for misuse, and we could not verify it, so we do not give a rule. Practically, treat it with care. Ask for photos, assess honestly, and if you decline, explain why in writing and offer a route such as a goodwill gesture. A refusal without reasons is the quickest way to a dispute.

If the customer disputes after a refusal, your evidence is the photos, your assessment and your message. Keep the tone neutral. An issuer will read both sides.

What should your policy say about a faulty product refund?

Keep the faulty goods section short, specific and free of deadlines. A good version covers four points:

What counts. Faulty, unsafe or not as described items are covered by the Australian Consumer Law.
What the customer gets. A repair, replacement or refund as the law requires, with the choice explained.
What the customer needs to do. Contact you, with the order number and a photo.
What you do. Reply within a day, confirm the remedy in writing, and cover reasonable return costs when a fault is confirmed.

Leave out time limits, restocking fees and anything that sends the customer to the manufacturer. The ACCC's sweep of more than 2,000 retail websites flagged exactly those, along with fixed windows for reporting faults, and a policy that avoids them is both safer and easier to defend. Our post on store terms and conditions goes through the wording line by line.

What's different for Australian merchants?

The remedy is a legal right, not a favour. The guarantees apply to goods sold in Australia, and the ACCC says "no refund" signs and terms do not override consumer rights, and relying on them for faulty goods is illegal.

No time limit on your side. Do not write a fixed deadline for fault claims into your policy. We cover this in our post on store terms and conditions.

Long bank windows. NAB gives cardholders up to 120 days for Visa and Mastercard disputes, varying by reason, and 210 days for eftpos. CHOICE reports the Visa window can run from the expected delivery date, with a 540 day outer limit, and that a retailer may end up refunding via a chargeback even if it first refused.

Escalation. Consumer Affairs Victoria says chargeback limits run 45 to 120 days by provider, that chargebacks are not available for cash, transfers, cheques, direct debit or BPAY, and that customers can go to AFCA if their bank rejects a chargeback request.

Fees in A$. The dispute fee is A$25, and Shopify's international fees page says card and conversion fees are not returned on refunds. We could not verify how that applies to domestic cards.

Common mistakes

Refunding by another route

A bank transfer or store credit does not credit the card. The customer can still dispute.

Not saying you refunded

A refund the customer does not know about invites a filing.

Refunding twice

If you see a chargeback and a refund, check before you issue another.

Refusing a remedy you owed

For a major problem the customer chooses the remedy. Do not substitute your own.

Setting a deadline for fault claims

The ACCC's commissioner has said consumer guarantees do not have a specific expiry date.

Leaving the evidence late

The deadline is 7 to 21 days. Start the day you see the dispute.

Skipping the summary page

A reviewer reads fast. Lead with the timeline.

What we could not verify

How an issuer weighs a refund record against a customer's claim when the refund and the dispute overlap.
Bank processing times for showing a refund.
Whether the A$25 dispute fee is returned on a win, where Shopify's pages differ.
How to treat a refund made around the time a chargeback opens, which depends on Shopify's current handling.
The test for customer-caused damage, which the ACCC page we read does not set out.
State or territory differences and anything beyond the ACCC page of 21 July 2026.

Where a decision depends on one of these, ask Shopify support, a lawyer or the ACCC and keep the reply.

Frequently asked questions

What if the customer disputes after I already refunded them?

Respond with the refund record: amount, date and payment method, plus the customer's fault report and your reply. Say clearly that the customer has been refunded in full. Do not issue a second refund. Shopify suggests proof of an earlier refund as evidence for the credit not processed reason.

Can I refund a customer once a chargeback is open?

Shopify says refunds generally cannot be issued after a chargeback, but can for an inquiry. A full refund ends an inquiry, while a partial refund does not. If a chargeback is open, you respond or accept. Check your admin before refunding, and ask Shopify support if a refund and dispute overlap.

What do I owe for a faulty product in Australia?

The ACCC says you must offer a repair, replacement or refund, and you cannot send the customer to the manufacturer. For a major problem the customer chooses a refund or replacement with no deduction for use. For a minor problem you must repair it free of charge.

What evidence should I submit in a fault dispute?

Submit the refund or replacement record, the customer's report and photos, your replies with dates, the policy, the order and fulfilment details, and the product page at the time of sale. Lead with a one page timeline. Files must be PDF, JPEG or PNG, 2 MB each and 4 MB in total.

How long do I have to respond?

Shopify says the due date is usually 7 to 21 days after filing, in your store timezone, and 11:59 PM if no time is shown. Shopify submits what you have on the due date. The issuer can take up to 75 days after submission to decide.

Should I fight or accept a fault dispute?

Accept if you owed a remedy and did not provide it. Fight if you can show the remedy was given before the dispute, or the item was not faulty and your policy clearly applies. Weigh the order value against the A$25 fee and your time. We cannot verify how an issuer weighs the evidence.

Do I have to pay return postage on a faulty item?

If a fault is confirmed, the ACCC says you must reimburse reasonable return costs, and pay collection for bulky items. Customers do not need the original packaging. If no fault is found, you may charge collection and inspection costs, with a reasonable estimate given in advance.

Can a customer dispute months after the fault?

Yes. NAB gives cardholders up to 120 days for Visa and Mastercard disputes, depending on the reason, and 210 days for eftpos. CHOICE reports the Visa window can run from the expected delivery date, with a 540 day outer limit. Keep your records for at least that long.

Does a dispute count against me even if I win?

Shopify says every dispute counts toward your chargeback rate, and a high rate can lead to an account health notice, a reserve or NDRP enrolment. The NDRP fee in Australia is A$25. Preventing the dispute through a prompt, clear remedy is better than winning it.

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