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June 23, 2003

UK: Office of Fair Trading oversees re-writing of used car warranty terms

Warranty contracts used by hundreds of second-hand car dealers nationwide are now said to be more fair to consumers following action by the UK’s Office of Fair Trading. The contracts issued by Warranty Administration Services Ltd are used by around 300 car dealers across the UK including some Ford, Vauxhall, Rover, Fiat, Alfa Romeo and Daihatsu dealerships.

By bcusack

Warranty contracts used by hundreds of second-hand car dealers nationwide are now said to be more fair to consumers following action by the UK’s Office of Fair Trading.

The contracts issued by Warranty Administration Services Ltd are used by around 300 car dealers across the UK including some Ford, Vauxhall, Rover, Fiat, Alfa Romeo and Daihatsu dealerships.

Shropshire Trading Standards department referred the case to the OFT following a consumer complaint.

The OFT had concerns that some of the terms were potentially unfair and were part of a long and complex contract which could have confused consumers about their rights and obligations.

Warranty Administration Services revised its contract comprehensively to address the OFT’s concerns. Terms that have been changed include those that:

–  Ruled out the possibility of refunds in all circumstances. Term deleted.

–  allowed the dealer to cancel the agreement without defining circumstances in which this could occur. Term deleted.

–  provided an incomplete list of parts excluded under the warranty. Revised to set out clearly which parts are not covered.

–  defined mechanical breakdown in vague terms as failure ‘due to unforeseen circumstances’. The term has been revised to provide a clearer definition.

–  had the potential to prevent consumers from starting legal proceedings in their local court. Term deleted.

–  were unclear as to their effect and intention and others which sought to exclude liability in vaguely defined circumstances.

Welcoming the revised contract, OFT Chairman John Vickers said, “Buying a second-hand car is a big commitment, and consumers expect car warranties to provide security against breakdowns and failing parts. Such contracts must be both fair and clear about the rights and obligations of both parties.”

The Unfair Terms in Consumer Contracts Regulations came into force
on 1 October 1999. The regulations apply to standard contract terms used with consumers in contracts made after July 1995 and state that the consumer is not bound by a standard term in a contract with a seller or supplier if that term is
unfair.

They give the OFT and certain other bodies powers to stop the use of unfair terms, if necessary by obtaining a court injunction. Ultimately only a court can decide whether a term is unfair.

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