I’m in Canada (BC), and unfortunately there is no law governing refunds for consumer goods. Apple offers if of their own volition and can implement it here as they see fit. In this case it’s within their right to insist that the unit is repaired rather than replaced.
Can they just keep it indefinitely and never refund you? I doubt that.
We also don't have a law that says "when XYZ then you must get a refund", but it follows from the law that says "the consumer has a right to a product conforming expectations". If they don't provide what they promised or lead you to expect, you can start to make demands.
(Fun fact: we have indefinite warranty because of this, so long as you can make it believable that the product should have lasted the given amount of time. In practice, all shops use the EU minimum of 2 years as maximum warranty term, also for things that can be expected to last five times as long, such as a TV. The person above you is right: they just pretend and see what they can get away with.)
Eventually it would be up to a judge to say whether any given demand is reasonable, but for most situations there's case law available and most companies don't feel like going to court when the case law is established enough that the consumer market authority has guidance on what rights follow from this.
I had this exact situation: a good in repair for months with no feedback besides promises to update me soon. They finally sent the refund one day before the date I had told them I was going to hand it off to a no-cure-no-pay collection agency. Half a year of pushing them at least once a week: calling, emailing, snailmailing, trying to get stuff moving. (Possession really is 90% of the law.) What a headache that was. Later found there were more people in reviews describing the same situation for this store. Only a handful per hundred superficial positive reviews but, still, the negative reviews were elaborate and I could have known.
