i am new to the hosting business, i will be selling annual subscriptions only and was wondering if someone could kindly explain what the legal implications for refund is. As far as I am aware, a service is consumed upon order so it is legally non-refundable, and as i am aware webhosting is actually a service.
i've seen alot of web hosting sites that say they dont give no money back gurantee but mention something about a pro-rata refund etc.
Also, i would like to write up an effective refund policy, is there anywhere i can look for it?
So hosting is consumed over the term paid for. So, basically if they paid for 1 year and then 2months later wanted a refund, i am legally required to refund the remaining 10 months, is that correct? i see alot of hosts also adding some administration fees to it aswell. So if i add a $15 administration fee, it would be as follows: 12months minus 2months consumed and then minus $15 from the pro-rata refundable amount. is that correct?
Also, can anyone comment on how it is with web design. If i was to take a 50% non-refundable deposit upfront for a webdesign, i dont have to refund that do i? as that is a service that is consumed as soon as I start work on it?
As the provider you set the terms; though I would recommend your attorney review the terms of service.
In terms of annual hosting, what we do when some one cancels is convert their account from annual to the minimum payment term and then base a pro-rated refund on time served multipled by what they would have paid per period on the minimum term.
If some one pays one $265 for one year of hosting where they would pay $75 quarterly, and they cancelled seven months in then we would take $265 - (7 x $25) to calculate their refund.
It all depends on your policies, hopefully you won't have to refund anyone due to early cancellation but you do get to set those terms. For me it is full refund within first 30 days and then no refund offered at all. It helps to offer monthly payment options however and recommend to a new client showing incertaintly they use the 1 month option to test the water and see if they will be happy with the server.
I've only had one early cancellation, they had about 6 months left on an annual payment and moved to a local ISP for their hosting, no reason was ever given when asked but since we had aquired the account from a friends business we heard through the grapevine it was because they didn't know us personally. The funny thing is we still are their domain name reseller so they do still do business with us to this day, and we do send out annual calendars to all our clientelle which may have helped.
Now, even if your terms say no refunds you'll still have to be flexible enough to give in to some folks and really I would refund someone who decided to bail after xx days on an annual payment if it were for a good enough reason.
I think your best bet is a 30 day risk free trial and then go with a pro-rated refund for unused time. But the catch is that users get free setup and reduced fees for pre-paying in advance that are accessed if they cancle early. By doing this it will ensure that you make a resonable amount of money for the work involved with setting them up which is front-heavy but allows them to recover some funds if they cancle early.