The consumer’s issue:
“I bought a used car in August 2015, and at the time of purchase, I took out a three-year mechanical breakdown warranty. On 20 July 2017, I submitted a claim for the replacement of a steering rack, but this was declined because I hadn’t serviced the car and had therefore voided the policy. I also was told I wasn’t entitled to a refund of my premium. I believe the servicing clause wasn’t sufficiently highlighted to me and that the cancellation clause is unfair because the warranty company shouldn’t be allowed to benefit from the policy.”
The accredited business’ response:
- The vehicle was last serviced in February 2016 and was due for a service in February 2017 – this didn’t take place.
- As such, the agreement had been invalidated by the time of the claim in July 2017, and this is clearly explained in the terms and conditions of the policy.
- Furthermore, the policy states that if it is cancelled, there is no surrender value and no monies paid will be refunded so we will not be reimbursing the remaining premium to the customer.
The adjudication outcome:
- Having read through the terms and conditions of the policy, The Motor Ombudsman adjudicator thought that the term on servicing was made clear. This is because it was set apart from the rest of the policy and was written in bold.
- It also isn’t an unusual term for an extended warranty, and is therefore deemed not to be unfair.
- The adjudicator also concluded that as the terms and conditions allowed the warranty company to keep the premium in this situation, no refund was due to the customer.
- As the adjudicator didn’t uphold the complaint in the consumer’s favour, the ombudsman was asked to review the case for a final decision.
The ombudsman’s final decision:
- With the servicing clause, the ombudsman felt this was sufficiently clear, and satisfied the requirements of The Motor Ombudsman’s Vehicle Warranty Products Code.
- The first term of the policy was for the consumer to read the whole agreement carefully, because failing to keep to the terms and conditions, could mean voiding the warranty.
- As such, it was reasonable for the warranty company to cancel the policy.
- However, the ombudsman upheld that it was unfair for the warranty provider to keep the whole of the remaining premium.
- The ombudsman noted that in the examples of unfair terms included in the Consumer Rights Act 2015, this was in there explicitly, and that, in these circumstances, the amount of money kept by the warranty provider seemed disproportionate.
- The ombudsman partially upheld the consumer’s complaint and she was awarded a rebate from her premium to the value of £133.64.
- The warranty company was allowed to retain whatever it needed to cover its own administration costs, as it would be unfair to penalise them for the consumer’s breach of the policy.