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Will warranties be in the firing line?
Money Talk
By Marc Gander
Consumer Action Group
Marc Gander believes that the OFT should look at warranties
Buy any electronic goods, a washing machine or a new television and the chances are you could be offered an extended warranty - or service charge.
The idea is that the seller guarantees the good is free from defects and will repair or replace it for a certain period of time.
But a trend has developed in the last 15 years or so of encouraging the sale of extended warranties as part of consumer-product package. This is an insidious and unfair practice.
It exploits a general ignorance of consumer rights and a, mostly, unjustified fear that their new purchase will not go the distance.
Were consumers to be properly aware of their rights, it is unlikely that they would pay out as much as a further 20% of the purchase price on a further guarantee.
Any consumer will tell you they want the guaranteed repairs, not the other value-added frills that come with most warranty packages.
But now, the new Consumer Protection from Unfair Trading (CPUT) Regulations 2008 may contain a provision which may assist consumers to reverse this trend.
'Satisfactory' quality
Consumer legislation, at least since 1979, has imposed a duty upon retailers that the goods which they sell must be of merchantable quality. This requirement has more recently been mainly re-badged so that goods must now be "satisfactory".
This has been taken by the courts to mean that a product must work and must remain working for a reasonable period of time.
The courts are unlikely to expect consumers to re-invest £500 or so every couple of years in a new television or washing machine, or much larger sums in a motor car, nor have to spend substantial sums on keeping those products working during those first few years of use.
On that basis, it is reasonable to say that most consumers are already adequately protected by consumer legislation and certainly well beyond the perceived norm of the "one-year guarantee".
The routine selling of extended warranties has reduced consumer awareness to a point where purchasers now typically resign themselves to their fate when their plasma TV breaks down a year and a day after purchase and curse for not having availed themselves of an additional warranty at the time they bought the thing.
New regulations
But now the new CPUT regulations, which are enforceable by the OFT, require commercial organisations to trade fairly with their consumer clients.
There is a real chance that the slumbering culture of consumerism may be reawakened, as both traders and customers see the reality of their true obligations and entitlement 
The regulations contain a provision which protects consumers from purchasing services or rights to which they are already entitled either by an existing contract or by law.
Schedule one of CPUT lists 31 other commercial practices which are automatically unfair. Number 10 in the list is: "Presenting rights given to consumers in law as a distinctive feature of the trader's offer."
Whether by accident or by design, it is clear that the new regulation is capable of being applied to extended warranties. It is clear that in the main, the consumer who is buying an extended warranty is in effect buying duplicate rights.
The extended warranty has produced a £500m-a-year market for insurers. My view is that it has reduced pressure on manufacturers to maintain the quality of longevity in their products.
I believe it has reduced incentives for retailers to insist on the highest standards of production, as both of these two parties are freed from the burden of having to bear the cost and inconvenience of providing replacements and repairs.
All this has happened by teaching the consumer that it is he who should bear the costs of repairs or replacements, as well as providing a nice profit for the retailer and insurer. The consumer now expects to pay for consumer rights which are already guaranteed to him by law.
I believe the extended warranty is an overpriced and unnecessary insurance cover and that the consumer has now been brainwashed into thinking that without such a cover, there is no other solution.
Unfortunately, CPUT does not permit consumers to take their own direct action in the courts. It is the OFT which has a duty to take action on their behalf.
In other words, consumers must recognise unfairness, they must write to the OFT, which must agree that the practice is unfair and must agree to take some action. But none of this is insurmountable. There are many consumer websites to help with this.
If the Office of Fair Trading, as enforcer of the CPUT regulations, is prepared to use the new regulations with vigour and imagination, there is a real chance that the slumbering culture of consumerism may be reawakened, as both traders and customers see the reality of their true obligations and entitlement.
Selling duplicate rights in extended warranties seems to me to be quite a good place to start.
The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.
Money Talk
By Marc Gander
Consumer Action Group
Marc Gander believes that the OFT should look at warranties Buy any electronic goods, a washing machine or a new television and the chances are you could be offered an extended warranty - or service charge. The idea is that the seller guarantees the good is free from defects and will repair or replace it for a certain period of time.
But a trend has developed in the last 15 years or so of encouraging the sale of extended warranties as part of consumer-product package. This is an insidious and unfair practice.
It exploits a general ignorance of consumer rights and a, mostly, unjustified fear that their new purchase will not go the distance.
Were consumers to be properly aware of their rights, it is unlikely that they would pay out as much as a further 20% of the purchase price on a further guarantee.
Any consumer will tell you they want the guaranteed repairs, not the other value-added frills that come with most warranty packages.
But now, the new Consumer Protection from Unfair Trading (CPUT) Regulations 2008 may contain a provision which may assist consumers to reverse this trend.
'Satisfactory' quality
Consumer legislation, at least since 1979, has imposed a duty upon retailers that the goods which they sell must be of merchantable quality. This requirement has more recently been mainly re-badged so that goods must now be "satisfactory".
This has been taken by the courts to mean that a product must work and must remain working for a reasonable period of time.
The courts are unlikely to expect consumers to re-invest £500 or so every couple of years in a new television or washing machine, or much larger sums in a motor car, nor have to spend substantial sums on keeping those products working during those first few years of use.
On that basis, it is reasonable to say that most consumers are already adequately protected by consumer legislation and certainly well beyond the perceived norm of the "one-year guarantee".
The routine selling of extended warranties has reduced consumer awareness to a point where purchasers now typically resign themselves to their fate when their plasma TV breaks down a year and a day after purchase and curse for not having availed themselves of an additional warranty at the time they bought the thing.
New regulations
But now the new CPUT regulations, which are enforceable by the OFT, require commercial organisations to trade fairly with their consumer clients.
There is a real chance that the slumbering culture of consumerism may be reawakened, as both traders and customers see the reality of their true obligations and entitlement The regulations contain a provision which protects consumers from purchasing services or rights to which they are already entitled either by an existing contract or by law.
Schedule one of CPUT lists 31 other commercial practices which are automatically unfair. Number 10 in the list is: "Presenting rights given to consumers in law as a distinctive feature of the trader's offer."
Whether by accident or by design, it is clear that the new regulation is capable of being applied to extended warranties. It is clear that in the main, the consumer who is buying an extended warranty is in effect buying duplicate rights.
The extended warranty has produced a £500m-a-year market for insurers. My view is that it has reduced pressure on manufacturers to maintain the quality of longevity in their products.
I believe it has reduced incentives for retailers to insist on the highest standards of production, as both of these two parties are freed from the burden of having to bear the cost and inconvenience of providing replacements and repairs.
All this has happened by teaching the consumer that it is he who should bear the costs of repairs or replacements, as well as providing a nice profit for the retailer and insurer. The consumer now expects to pay for consumer rights which are already guaranteed to him by law.
I believe the extended warranty is an overpriced and unnecessary insurance cover and that the consumer has now been brainwashed into thinking that without such a cover, there is no other solution.
Unfortunately, CPUT does not permit consumers to take their own direct action in the courts. It is the OFT which has a duty to take action on their behalf.
In other words, consumers must recognise unfairness, they must write to the OFT, which must agree that the practice is unfair and must agree to take some action. But none of this is insurmountable. There are many consumer websites to help with this.
If the Office of Fair Trading, as enforcer of the CPUT regulations, is prepared to use the new regulations with vigour and imagination, there is a real chance that the slumbering culture of consumerism may be reawakened, as both traders and customers see the reality of their true obligations and entitlement.
Selling duplicate rights in extended warranties seems to me to be quite a good place to start.
The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.
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