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Dual proposal over extended warranties

Competition Commission offers retailers two package to choose from

In a follow-up letter to its missive dated 20 May regarding remedies to the extended warranties issue, the Competition Commission has proposed two possible solutions.

The remedial packages are based on comments it has received from domestic electrical goods retailers following its first letter.

Each package has four basic stipulations:

— that consumers should be provided with the information they need to make an informed choice;
— that they should have time to reflect before buying an extended warranty;
— that alternative providers should have the chance to put forward their own extended warranty products;
— that retailers should be governed by an independently managed and enforced code.

The first package would require sellers of extended warranties to meet the following conditions:

— they must display the price and duration of the extended warranty with the price of the appliance it relates to;
— they must provide consumers with a leaflet giving information on statutory rights, alternative providers, broad categories of product reliability and repair costs, information on whether the warranty is insurance-backed and cancellation rights;
— a written quote must be provided, stating the price and duration of the extended warranty. It must also commit the retailer to selling at that price for the next 30-45 days and offer a full refund if the policy is cancelled within 60 days;
— retailers must write and remind consumers of their right to cancel, pay a pro-rata refund on any unexpended portion of the warranty if it is cancelled after a 60-day period, even if a claim has been made;
— retailers must be governed by an independently managed and enforced code.

The second package broadly covers the same requirements as the first, but would add the following two extra conditions:

— the sale of the extended warranty should not be completed on the day of the sale of the appliance — at that point retailers could only sell a warranty that extended the manufacturers guarantee by one year, but they could give a quote for an extended warranty.

The letter has been sent out to retailers, manufacturers and insurers, and the Competition Commission is inviting comments by 5 August. It is expected to report on the issue on 30 September.

Related links:
Competition Commission

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