DTI to overhaul extended warranty system

The Department of Trade and Industry is planning a radical overhaul of the extended warranty market - in time for Christmas.

The suggested reforms follow last December's critical report from the Competition Commission, which determined that the extended warranty market for domestic electrical goods was often unfair to consumers.

It especially criticised retailers for putting undue pressure on consumers to sign up to an extended warranty at the point of sale.

Consumer Minister Gerry Sutcliffe said in a statement: "Our position is clear: the market in extended warranties is not working for the benefit of consumers, and change is necessary.

"Recognising the importance of the Christmas shopping period for warranty sales, we intend to introduce the necessary changes by the end of November."

The draft reforms published today include making retailers show the price of the extended warranty alongside electrical goods, both in-store and in adverts.

The DTI also wants consumers to be given information about their statutory rights, as well as cancellation rights and details of the warranty.

As most extended warranties are bought at the point of sale, the DTI wants retailers to offer the warranty for sale for 30 days from when the goods were purchased to put an end to pressure selling.

Any discounts tied to the purchase of the extended warranty would also be available for 30 days.

At the same time if a consumer takes out an extended warranty when they buy a product, the DTI wants consumers to have the right to change their mind.

It further recommends that consumers are given 45 days during which to cancel any deals they take out. To make sure they are aware of this right, retailers will need to give customers a written reminder and offer a pro rata refund.

Consumers should also be given information about whether or not their warranty provides financial protection in the event of the supplier's insolvency, the DTI said.

The DTI is now soliciting views of businesses and consumers on the draft reforms. The consultation closes on 22 October and the document can be viewed on the DTI website here.