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@welshjester wrote:

If I ignore it will I get a mark against my account? I'm not sure of the best way to handle it. It should be a requirement that they return the item first before getting a refund if they don't want it.

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Ignoring it is really not an option. You need to either agree to the refund or challenge it otherwise the refund will still be taken from you anyway and it will count against you.  Please read the information that I have linked to in my precious post and then come back if you have any further questions.