Clampdown on costly extended warranties

Dixons, Comet and Argos have promised to inform customers in stores that they can buy extended warranties elsewhere if they want to.

The Office of Fair Trading has obtained legal undertakings from the retailers after it found that customers weren't getting value for money in this £1bn market.

Stores will have to offer leaflets showing that warranties are available elsewhere, maintain a price comparison site so buyers can shop around and provide clearer information about annual costs.

They'll also have to conduct regular independent mystery shopping exercises to help ensure shoppers get accurate information from sales staff.

The OFT proposed these tighter measures in February.

Fair Trading probe into extended warranties

Today's market study into extended warranties targets an area which has been a running sore for consumer regulation.

It's 10 years since the Office of Fair Trading did a similar study. New rules were imposed but shoppers are still losing out.

Now the market is worth £750m. But the OFT found in 2008 that buyers were losing nearly half that in what it called "consumer detriment" - paying too much or buying something they don't need.

A quarter of all electrical goods are sold with an extended warranty. The worry is that so many warranties are sold at the till, with the goods, that few people check the price. Then they don't bother to cancel.

This market study could end in enforcement action, another Competition Commission enquiry, recommendations to government - or nothing at all.

We'll see in the summer, when the market study is completed.