This has been on ongoing, unanswered question for some time now:
This question, with regard to one seller, was discussed in this post dated October 7, 2013. As of October 21, 2013, still no answer from Etsy Administration.:
And to the seller bringing up the discussion, Administration says “SHUT UP.”
Heya,My suggestion is to write to the Admin who has been corresponding with you and voice your position and concerns to them directly. They will be able to help out with any next steps and/or more information regarding shop/site policies.We can’t discuss individual account statuses in the forums as it’s considered private information.Thanks!Leslie
As of October 16, 2013, this seller had heard nothing back from Etsy.
And the question remains unanswered.
Second Etsy Seller speaks out about refunding on a custom order.