The OFT was concerned that customers were not getting a good deal when the extended warranty is being offered by companies.
Dan Moore, from the OFT has commented, “We want to make sure that when customers are being sold extended warranties that they are getting a good deal and that the value is as good as it can be. There are still some serious concerns in this market that customers are not really getting good enough value for money.”
In the last 10 years, the OFT has investigated extended warranties three times after consumer groups such as Which? raised concerns that the warranties were almost costing as much as the products themselves. In the past, some retailers have been accused of miss-selling extended warranties by implying that they are compulsory when you are purchasing a product.
The OFT have highlighted that consumers should be aware that extended warranties are never compulsory and that when you buy a product you are entitled to a one-year warranty without charge.
The OFT have developed a price comparison website that will allow customers to compare the prices of extended warranties online. This will reduce the pressure on them to buy in the store and give them the feeling that they have a choice. However, it has been found that only one in every four shoppers is actually looking at the warranty website before going ahead and buying one.
The OFT have released a statement that read, “Concerns by us have meant that some of the largest retailers of extended warranties in the country will now be consulting with us so they avoid being referred to the Competition Commission. We will be deciding whether these proposals they put forward for their extended warranties are acceptable later this year.”
The executive director of the consumer group, Which? is Richard Lloyd and he said, “What we’ve found is that extended warranties are a worse deal than they ever have been and this is despite electronic devices becoming more and more reliable.
We want to see more reasonable prices for these warranties and we hope that the consultation that is taking place between the major warranty providers and the OFT will bring a certain amount of resolution to the problems seen in the market”.