Retailers still flouting extended warranty rules

Retailers are still failing to comply with the law governing extended warranties on electrical goods.

An investigation carried out by the Office of Fair Trading (OFT) found that in around 45 per cent of the shops visited by mystery shoppers, retailers had not provided required relevant information about extended warranties.

The Government watchdog also said it found evidence that up to one third of sales staff failed to provide consumers with the correct information concerning consumer rights.

As a result of these findings, the OFT has written to stores that do not comply with the Supply of Extended Warranties on Domestic Electrical Goods Order 2005.

It is also working closely with the Radio, Electrical, and Television Retailers' Association (RETRA) and the British Retail Consortium (BRC), to ensure that stores that sell domestic electrical goods are aware of their obligations.

Tony Donaldson, OFT Director of Economics, said: "We are concerned that there is a lack of compliance by a number of sellers. The OFT continues to monitor the sector to ensure that consumers know their rights and are given the correct information when buying extended warranties.”

Extended warranties are policies that provide additional cover over and above the manufacturer's warranty on goods such as computers and televisions. The OFT has had a prickly past with the issue of extended warranties.

A market study it carried out in 2001 led to a Competition Commission inquiry. From this the Government drew up the Supply of Extended Warranties on Domestic Electrical Goods Order 2005. This obliges retailers to provide clear information about the extended warranties they provide, as well as requiring certain cancellation and termination rights.

In this first evaluation of the order, the OFT has concluded that, although there have been a number of benefits for consumers, some outlets are still not complying with the rules.

On the plus side the report found that:
· 15 per cent of consumers now shop around for extended warranties compared to four per cent in 2002
· fewer consumers are purchasing extended warranties at the point of sale, and this has fallen from 82 per cent in 2002 to 68 per cent in 2008, and
· since the introduction of the order, consumers have benefited by around £51 million.

To customers’ detriment, however, the report said that:
· leaflets were not always 'prominently displayed' as required in shops
· five out of 13 leaflets examined had pieces of required information missing
· in around 45 per cent of the stores visited by mystery shoppers, retailers had not provided required relevant information about extended warranties, and
· there was also evidence that up to one third of sales staff failed to provide to consumers the correct information concerning consumer rights as specified in the order.

The OFT said it would continue to monitor the market, and consider further 'mystery shopper' exercises. These may include testing sales staff on consumers' rights when purchasing extended warranties.