Direct answer
Is keeping the application fee on refunded orders legal?
It depends on your jurisdiction and what your seller terms say — and this page is explicitly not legal advice. Operationally the landscape reads clearly: keeping fees on refunded transactions is widespread, defensible when disclosed as compensating processing cost, and risky when sellers never agreed to it — particularly where consumer-protection frameworks treat undisclosed retention of value-for-nothing delivered unfavourably. The variable is disclosure, not the practice itself.
Three postures platforms occupy
Deliberate retention, disclosed in terms, compensating genuine processing cost: legitimate and common. Unknowing retention: the dangerous middle — contradicting published terms without anyone deciding to, discovered during seller audits or worse. Over-correction: refunding fees explicitly while also reversing transfers that already financed them, returning value twice. Each posture has different risk; only the middle one is an accident.
The consumer-protection direction
Jurisdictions increasingly scrutinise platforms retaining percentages of reversed transactions — direction varies by market and evolves; counsel tracks specifics. The engineering contribution is making retention visible: findings distinguish deliberate policy from default drift so legal review examines choices rather than archaeology.
Retroactive policy changes
Deciding mid-flight to stop retaining raises questions about historical amounts; decide with counsel, communicate per terms-amendment provisions, and consider grandfathering. What engineering must never do is change behaviour silently between terms versions.
Common questions
Do marketplaces commonly keep fees on refunds?
Mixed — disclosure quality varies more than the practice itself. Auditing your own behaviour against your own terms is the actionable step.
Should we change policy retroactively?
Counsel question first, operations second. Whatever you decide, implement visibly and version your terms accordingly.