Warranties: A time for change

Shelling out hundreds or even thousands of pounds on a computer and the accompanying peripherals isn't a decision people take lightly. As a result, many plump for a retailer's extended warranty.

Unfortunately, judging by the complaints we receive, warranties seldom give peace of mind. The often hefty price tags - and seemingly empty promises - leave many feeling ripped off.

In 2002, the Office of Fair Trading (OFT) researched this area of consumer rights. It was disturbed enough to ask the Competition Commission to investigate further. The conclusions of this investigation, published in December last year, were damning. The industry has been ordered to overhaul what the Commission calls a "complex monopoly".

No guarantee of peace of mind
The results of the Competition Commission report will strike a chord with many Computeractive readers. Most computers and peripherals come with 12-month manufacturer's warranty for hardware and labour. As is often the case, though, PCs and peripherals often fail within weeks of this original guarantee coming to an end.

Enter the concept of the extended warranty. These are meant to offer additional security but the Competition Commission found cause for concern.

Most extended warranties are sold at point of sale. Although terms and conditions vary between sellers, usually these warranties only cover hardware costs and labour. Yet, according to the Competition Commission, little factual information is given to consumers, thus giving retailers and manufacturers a huge competitive advantage to hide behind hidden clauses.

It also said a lack of competition at the point of sale meant that extended warranties are often sold at excessive prices. The Commission came to the conclusion that the market, worth an estimated £900m a year, is "operating against the public interest".

Judging by the number of readers who contact Computeractive on the subject, this doesn't surprise us. Many complain they are fed up with disingenuous advice and limited customer care.

Software problems are usually not covered by warranties, but even in the case of hardware issues, consumers are often asked to perform some repairs themselves following instructions given over the phone. Anything, it seems, to avoid sending out a technician.

The OFT's changes
The Competition Commission's findings have led the OFT to ask for some radical changes. Retailers and manufacturers will have to show the true price of the extended warranty. Additionally, they should give consumers information about their statutory rights, cancellation rights and warranty details.

Consumers will also have 45 days to cancel their extended warranty, and will receive a written reminder of this right from the seller. If they want to cancel after 45 days, they must be allowed to, and they should receive a pro-rata refund.

Retailers will not be able to push consumers into buying warranties exclusively at the point of sale, as the same deal must be available for 30 days after a sale. Any discounts tied to the purchase of the extended warranty should also be available for 30 days.

Consumers must also be advised if their warranty is 'ring-fenced', in other words, whether or not they will have financial protection in the event of insolvency of the supplier.

The OFT is currently in consultation with retailers and manufacturers but it is banking on the major changes it has called for being agreed by the industry. all being well, they should be in place by the middle of the year.

What are your current rights?
The main law giving consumers protection is the Sale of Goods Act 1979. This forms the framework for consumer rights. It says that goods must be fit for sale and not damaged at the point when you buy them. They must also be fit for the purpose they were made for and must be as they are described.

Last year, the Department of Trade and Industry beefed up rights under the Sale of Goods Act by introducing the Sale and Supply of Goods to Consumers Regulations 2002 Act. This gives consumers far more power when it comes to demanding compensation for faulty goods and is a good thing all round. It is particularly useful when needing to invoke a manufacturer's original warranty. This will now be legally binding.

Consumers will also have the right to request a repair or replacement if goods are found to be faulty. Although this is the usual compensation offered by companies, until now, it has not been enshrined in law.

In addition, if a product is found to be faulty within the first six months, the burden of proof is shifted to the retailer in any dispute. So unless the retailer can prove otherwise, items will be deemed faulty at the time of purchase.

Are warranties worth it?
So, with all these rights, are extended warranties really necessary? To give credit where credit is due, the Competition Commission did find that the concept of extended warranties is a good one and, believe it or not, said that the majority of people are reasonably satisfied.

Theoretically, extended warranties provide a valuable service to many customers who want to cover themselves and who may also require customer support services.

People should realise that the law can be confusing and a very grey area. The law might say that a some product could reasonably be expected to last at least six years (five in Scotland) but this doesn't mean a judge will rule in your favour if it doesn't. The period prescribed by law is only the time during which you can bring a case to court. It doesn't state that something should definitely last that long.

Think of computers as you think of cars: things wear out, and just as you may have to change tyres or the exhaust on a car, the same can be said about any component in a computer. Do you think you can fix it yourself? Some people love tinkering with technology but a great many more do not and have neither the time, nor the expertise to fix things when they go wrong.

You'd better shop around
So should you buy an extended warranty? Remember you should always shop around. Ask yourself how secure you feel about the quality of the product and how much you have paid for it. Be realistic about the extent of your technical know-how.

Always check the terms and conditions of a warranty for 'hidden clauses', such as batteries that aren't covered because they are classified as consumables.

Paying extra for on-site service can sometimes be a waste of time, since this is often interpreted as 'back-to-base'. Hopefully, the changes asked for by the OFT will be incorporated and will force companies to ensure that the warranties they are selling are exactly what customers think they are buying.

CASE STUDY 1
John Kensey is not an advocate of extended warranties and shows why the OFT is right to demand ring-fencing of warranties. He was one of Tiny Computers' victims. Before it went bust in January 2002, he bought an on-site extended warranty. Time Computers took over the warranty but does not carry out on-site repairs.

"When my computer needed repairing I had to send it back, but it was damaged in transit. I spent £250 on my warranty, over £90 for the damage and at least £30 on phone calls. My advice to anyone thinking of taking out an extended warranty is simply: don't."

CASE STUDY 2
It is not all gloom and doom. Readers such as Samantha Jay occasionally write in to point out that customer service is not always dire.

"My contacts with PC and component suppliers/manufacturers have been very good. Agfa replaced a burnt-out transformer and cable for my scanner free of charge.

"When I could not install the software downloaded from the Ricoh website for my digital camera, the company sent me a CD through the post within days. A faulty Canon printer was replaced at once by PC World."