By TIM HEMING
Article from The Sun
Published: 07th February 2012
RIP-OFF extended warranties on electrical goods are set to be a thing of the past after high street retailers agreed to clean up their act.
Under threat of being referred to the Competition Commission for a major investigation, Dixons, Comet and Argos offered to provide better information to shoppers, launch a comparison website for deals, and conduct mystery shopping exercises to improve service.
The Office of Fair Trading has slammed the culture of extended cover sales for household goods, citing major pricing competition concerns in the £1billion market.
Warranties are supposed to help if expensive items need repair or replacement after the manufacturer's guarantee runs out.
But the OFT criticised the way sellers flogged the policies at the same time as the electrical goods, meaning only around a quarter of consumers shop around for a better deal.
The OFT also hit out over a lack of relevant information and Pay As You Go warranties — where shoppers fork out for a rolling monthly contract — as considerably more expensive than comparable fixed term warranties.
Research from consumer group Which? found the warranties can cost more than 80 per cent of the price of the item, with just a one-in-ten chance that the appliance will require repair over its first five years.
Dixons Retail — which owns Currys and PC World — markets its two to five-year 'Premier Whatever Happens' deals as a sensible insurance option.
However, a five-year extended warranty on a washing machine with a relatively small chance of needing repair in the first five years would cost £170, when the initial price of the appliance was only £260.
Annie Shaw of finance help website cashquestions.com said the sale of extended warranties should be banned at point of sale.
She added: "Back in 2003 it was revealed that 47 per cent of Dixons pre-tax profits came from warranties and that Comet made up to 80 per cent of its profit from sales of warranties.
"If these products are as 'valuable' to consumers as retailers suggest then there would be no problem sending them home to buy cover elsewhere, much as you buy insurance when you buy a house or a car."
The retailers have now agreed to clean up their act by publicising a website where you can compare all the different cover options from retailers.
There will also be more in-store leaflets and on-shelf information explaining consumers' options and regular independent mystery shopping exercises to help ensure shoppers get accurate information from sales staff.
Ann Pope, Director of the OFT's Goods and Consumer Group, said: "'Millions of extended warranties are sold in the UK each year and we remain concerned this market does not work as well as it could for consumers.
"We welcome the retailers' initiative in offering undertakings and we now want to hear from consumers and others whether they think these will lead to improvements."
"If these undertakings are accepted by the OFT it would allow us to address the competition concerns more quickly and also reduce the burdens of further, detailed investigation."
The OFT expects to reach a final decision on whether to accept the undertakings in the Spring.
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