Fashion Nova has reached a settlement with the Federal Trade Commission over charges that it violated rules on shipping and refunds.
Under the terms of the proposed agreement, the online fashion retailer will pay $9.3 million to refund customers after it failed to properly notify them and give them the opportunity to cancel their orders when it was unable to ship merchandise in the timeframe it specified for delivery. The agency also said that the company illegally used gift cards — instead of providing refunds — to compensate shoppers for unshipped products.
“The same rules that we have enforced for nearly 50 years against catalogers and other mail-order companies also apply to online sellers,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “Online retailers need to know that our Mail Order Rule requires them to notify customers in the event of shipping delays and offer the right to cancel with a full refund — not just a gift card or a store credit.”
The FTC’s complaint against Fashion Nova alleged that it violated the Mail Order Rule in two ways: It claimed that the retailer — with banners on its website reading “Fast Shipping” and “Expect Your Items Quick!” — made clear promises to shoppers for expeditious product deliveries. It also said that Fashion Nova at times did not refund customers for items that it was unable to ship; instead, it was company policy to issue gift cards, which are not considered refunds under the Mail Order Rule.
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Of the $9.3 million, $7.04 million will be sent to the FTC, which it will use to refund consumers, while the remaining $2.26 million must be refunded directly by Fashion Nova to its shoppers who received gift cards. (They will be reimbursed for the unused balances on their gift cards.) Under the agreement, Fashion Nova is required to identify consumers eligible for refunds. The FTC and the retailer will then distribute the payments to the affected customers.
The settlement also requires Fashion Nova to provide refunds instead of issue gift cards moving forward and requires it to ship merchandise within one day of the order if it doesn’t specify a shipping date at checkout.
Fashion Nova also recently made headlines after it sent shoppers a text message urging them to shop on its site “when that stimulus deposit hits.” The marketing effort drew backlash on social media, with many users accusing the retailer of being tone-deaf during the coronavirus pandemic, which has prompted many consumers to earmark their checks for essential goods, household products and monthly bills instead of discretionary purchases.
Fashion Nova Gets Backlash for ‘When That Stimulus Deposit Hits’ Text