Lakewood and Passaic online shoppers, fond of the Shan and Toad kids' clothing line but fuming over its no-refund policy, have reasons to cheer today. To an extent.

Townsquare Media

The company, which offered only exchanges or store credit to buyers in Lakewood and Passaic, is revising the policy, in a settlement with the New Jersey Attorney General's office.

However, it does not mean that refunds are in the offing for returns. The company is, instead, offering store credit only, across the board, despite its concern of adverse impacts on its business.

According to authorities, Shan and Toad revised its refund-eligibility guidelines after the Division on Civil Rights and the Division of Consumer Affairs determined that it amounted to redlining, and a likely violation of state anti-discrimination and consumer protection laws.

Without leveling a direct accusation, the AG's office noted that both communities "contain large populations of Orthodox Jews."

It does not explain why the policy did not target other communities in the state with sizeable Orthodox populations.

Shan and Toad cite inordinate amounts of returns from the areas in question, along with payment disputes and chargebacks that it considered without merit.

A spokesperson for the company said that a court proceeding would have been a prohibitive investment of time and finances.

Under the settlement, Shan and Toad admits no wrongdoing, but agrees to offer refunds to customers in both towns, and to develop and publicize a revised return policy.

The company was given a suspended $10,000 penalty, a figure that would be dropped within a year if it adheres to the conditions.

An Assurance of Voluntary Compliance (AVC) agreement requires the company to avoid placing "more restrictive conditions" on customers, based on where they live, if it amounts to discrimination against any protected class, such as religion.

"This settlement sends a clear message to on-line and mail-order sellers that red-lining - i.e., treating customers from certain areas less favorably based simply on their address -- is not acceptable in New Jersey when it has the effect of discriminating against people based on their faith or any other protected category," Porrino said in prepared comments.

Shan and Toad's position, related by Chief Curator Shana Laub, follows verbatim:

"Legal action had been brought against my company, Shan and Toad, alleging that our return policy was discriminatory.  We have reached an amicable resolution, although I affirmatively deny that any violation has occurred.  We maintain our position that a more restrictive return policy was in place for certain geographical areas based on extensive analytics that found an exaggerated and extensive amount of returns coming from specific areas in relation to others.  Defending our position would have been too expensive and time-consuming for a small business like ours. 

"The return policy was enacted due to a disproportionate amount of returns coming from certain geographical areas.  It believe that it was not of discriminate nature as it targeted specific zip codes.  Besides for an unusually high return rate coming from these areas, we also had received numerous baseless chargebacks or payment disputes, in the event that a return was denied due to “worn” or “used” condition.

"Being that a suspended penalty had been imposed, we have reluctantly agreed to comply with the State of New Jersey’s Office of the Attorney General and impose a universal return policy in which we do not issue refunds, but rather store credit only.  It is unfortunate that a stricter return policy needs to be in place for all areas, as I believe it will have an adverse effect on the business.  Rather than protecting small business, it seems that the state is more concerned with protecting people that cannot adhere to a store policy or behave like decent human beings."

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