Returns query and witholding payment

I work for an online store and we recently had a query with a customer who has a credit account with us. The customer wanted to return a very old unit and was not entitled to a refund but exchange only in line with our returns policy. As we would not adhere to a refund for an old invoice (already paid) the customer has decided to not pay any invoices which are of no relation to the return request until resolved to their satisfaction. I have also had in the past where customers like to just deduct the refund they want from their outstanding balance. Please can you advise the best way to respond to these situations?