Extended warranty rules change in April 2005

Electrical goods retailers frequently offer extended warranties at the point of sale. These can add 50% to the product cost, customers typically are offered only one supplier's terms, and generally there is no information about the likely costs of future repairs.

Proposals to offer more clarity were first published by the Department of Trade and Industry in July 2004 and amended in November. They followed a finding by the Competition Commission that the market was not working as well as it should, with consumers often being put under pressure to sign up to an extended warranty at the point of sale.

The new rules, which will be implemented through The Supply of Extended Warranties on Domestic Electrical Goods Order 2005, provide that from 6th April retailers will have to:

• show the price of the extended warranty alongside electrical goods in store, in catalogues, on web sites and in print adverts;
• give consumers information about statutory rights, cancellation rights and details of the warranty, including whether or not their warranty provides financial protection in the event of insolvency and whether it terminates in the event of a claim;
• give consumers 45 days to cancel their extended warranty, including a written reminder of this right and the right to cancel at any time and receive a pro-rata refund; and
• offer the extended warranty on the same terms for 30 days if the consumer chooses not to buy it there and then. Any discounts tied to the purchase of the extended warranty would also be available for 30 days.

Consumer Minister Gerry Sutcliffe said the proposals have been largely welcomed by both business and consumers. "We are ensuring business is given a full 12 weeks to prepare for implementation of the measures on 6th April."

He is also asking the Office of Fair Trading to begin its review of the market and the impact of the recommendations in 2007.

The text of the order was not available at the time of writing, but there is new guidance for businesses from the DTI.