THE rules on selling extended warranties are to be tightened in time for the Christmas shopping rush.

The aim is to stop consumers being pressured into buying extended warranties that may not be worth the money - and to give them a cooling-off period if they have signed up.

Retailers will also have to provide more information on the cost of warranties, and on consumers' statutory rights.

Details of the draft legislation were announced by Consumer Minister Gerry Sutcliffe yesterday.

The Department of Trade and Industry will seek views on the legislation from consumers and businesses before it becomes law.

A report by the Competition Commission in December 2003 found that the extended warranty market was not working as well as it should, with consumers often being put under pressure to sign up to an extended warranty at point of sale.

The remedies proposed in today's consultation mean that, in future, retailers will have to:

Show the price of the extended warranty alongside electrical goods, in store and in adverts

Give consumers information about statutory rights, cancellation rights and details of the warranty

Give consumers 45 days to cancel their extended warranty, including a written reminder of this right and the right to cancel at any time and receive a pro-rata refund

Offer the extended warranty on the same terms for 30 days if the consumer chooses not to buy it there and then, with any discounts tied to the purchase of the extended warranty available for 30 days

Inform customers about whether or not their warranty provides financial protection in the event of the company which sold it to them going broke.

Announcing the draft legislation, Mr Sutcliffe said: "The market in extended warranties is not working for the benefit of consumers, and change is necessary.

"The consultation document seeks views on a draft Statutory Instrument which helps redress the balance in favour of the consumer. Recognising the importance of the Christmas shopping period for warranty sales, we intend to introduce the necessary changes by the end of November."

The Competition Commission was asked to investigate the extended warranty market in July 2002 following complaints by consumers and consumer groups.

Its report last December identified four areas which were a cause for concern:

Almost all extended warranties are bought at the time of sale, with few consumers considering them before buying and little opportunity being given in the shop to consider alternatives

Extended warranties on offer at point of sale are nearly always from one provider, usually the retailer

There is generally no information available on reliability of electrical goods or likely repair costs

There is generally no information available on prices, terms or conditions about extended warranties from alternative providers.

The Commission estimated the top five retailers (accounting for 80 per of the market) made well over £100 million extra profit each year from extended warranties.

The cost of extended warranties could be up to one-third lower if the market were fully competitive, the Commission noted.

The new measures were welcomed today by trading standards officers in York.

Spokeswoman Liz Levett said: "This certainly strengthens people's arm and gives them more information. It also gives them time to think about whether an extended warranty is worth it.

"It's always a judgement call whether it is worth having them in the first place.

"I've had my video for 15 years and if I had had an extended warranty all that time I could have bought a new one five times over.

"It is possible to waste quite a lot of money, but it is also possible to have this insurance and not to have to worry, so it can be worth it.

"These measures would give people time to think twice, and if they want, they can get out of a warranty.

"That can only be better for the consumer."

Updated: 08:49 Thursday, July 29, 2004