The consumer’s issue:
“I bought a used car in August 2015, and at the time of purchase, I got a three-year extended warranty which was due to expire on 31 August 2018. On 20 July 2017, I submitted a claim for a replacement steering rack, but this was declined because I hadn’t had the car serviced in line with the manufacturer’s service schedule, which thereby voided the policy. I believe the servicing clause was not sufficiently highlighted to me and that the cancellation clause is unfair because the extended warranty company has been allowed to retain my full premium. I would therefore like a refund of 50% of the £2,700 I paid for the policy as it was voided around halfway through.”
The accredited business’ response:
- The vehicle was last serviced in February 2016 and was due for a service in February 2017, but this wasn’t carried out.
- As such, by the time of the claim in July 2017, the policy had been voided which is explained in the terms and conditions.
- The terms and conditions also state that if the policy is voided, there is no surrender value and no monies paid will be refunded to the customer.
- Therefore, we will not be refunding 50% of the policy premium as requested by the customer.
The adjudication outcome:
- The Motor Ombudsman adjudicator didn’t uphold the customer’s complaint.
- This is because after reviewing the terms and conditions of the policy, he found the terms around servicing and cancellation to be clear.
- He also noted that the consumer had a 14-day cooling off period and didn’t exercise this. This meant that the customer had been given time to read and understand the terms, and continued with the policy, thereby accepting the terms.
- The adjudicator equally did not consider the terms of the warranty policy to be unfair.
- The consumer was unhappy with the adjudication outcome and asked for the ombudsman to review the case.
The ombudsman’s final decision:
- Based on the evidence provided, the ombudsman partially upheld the customer’s complaint.
- In terms of the clause on servicing, she believed this to be clear and prominent. She also noted that the first term of the contract, in bold, was to read the document carefully to make sure consumers understand and comply with the terms and conditions to avoid voiding the agreement.
- The part relating to servicing was also in bold, which showed the extended warranty provider had tried to make this prominent.
- Where the ombudsman disagreed with the adjudicator was over the cancellation clause. She could see that the policy allowed the extended warranty provider to retain the premium, but she also noted the examples of unfair terms highlighted in the Consumer Rights Act 2015 and noted that they fell into this category.
- It didn’t seem proportionate for the extended warranty provider to hold onto the remaining premium when they would no longer have to provide any cover.
- As such, the ombudsman awarded a partial refund of the premium held by the extended warranty provider to the customer.
- The extended warranty provider was allowed to retain whatever was necessary to cover their costs, and the ombudsman also factored in that the extended warranty provider would not have received the full premium, and the rest was to be paid to the consumer.
- As per the ombudsman’s final decision, the customer’s complaint was partially upheld and the consumer was awarded a sum of £133.64.