Travel agents and electrical retailers ordered to play fair; OFT

Scottish holidaymakers are to be granted the same consumer protection as travellers from south of the border following stern criticism of Britain's leading holiday companies by the chief consumer watchdog.

The Office of Fair Trading last week stepped up their campaign to safeguard consumers on a range of fronts, when they took both the holiday industry and electrical retailers to task for ripping them off and failing to deal with them fairly.

The OFT found Scottish travellers suffered most at the hands of the top holiday firms - including Thomas Cook, Thomson, Mytravel and First Choice - because contracts governing many holidays they sell only apply to English law, meaning consumer protection laws which guard Welsh and English holidaymakers do not cover tourists from north of the border.

OFT found Scots and the Northern Irish were discriminated against by the holiday firms as they have no recourse in Scotland's courts to protect their rights.

"Existing contracts were governed exclusively by English law and granted exclusive jurisdiction to the English courts which was unfair to consumers in Scotland and Northern Ireland," explained a spokesman for the watchdog. "This is now being changed so that if consumers live in Scotland or Northern Ireland the Courts of Scotland or Northern Ireland can deal with disputes."

The travel operators have also agreed to redesign their contracts on a number of other fronts after publicly acknowledging that they have been contravening consumer laws which require retailers to treat their customers justly. The Association of British Travel Agents (ABTA) has also produced a model new contract for its members to use.

The OFT began investigating package tour operators and travel agents after concerns were raised about the terms and conditions applying to surcharges and cancellations, which were believed to infringe the Package Travel, Package Holidays and Package Tours Regulations 1992 EC directive.

It was found firms regularly slapped surcharges on customers when interest rates or exchange rates moved against them or fuel prices climbed, but when their overheads fell they never reduced consumer costs.

Similarly, onerous restrictions were imposed on consumers who wished to cancel holidays at the last minute which were deemed draconian by OFT when it was the tour operator who had failed to provide the holiday they had promised.

The following measures will be introduced:

ABTA Under the new contract, travel agents will surcharge when necessary but will also refund when prices fall. If prices rise by more than 10%, holidaymakers will be offered an alternative package, and refund where appropriate.

If the consumer cancels because of a significant surcharge, then insurance costs will be refunded. When there is a significant change to the holiday, customers will be compensated at a higher level than previously.

Thomas Cook The German-owned company no longer has surcharges. If a customer is forced to change to a more expensive holiday through no fault of their own, they will no longer be required to pay the difference.

Compensation for a changed holiday will no longer be restricted to a set scale, if the traveller can prove greater damages were incurred. Furthermore the deadline for complaining about alterations made 56 days before departure has been removed. Similarly, complaints received more than 28 days after the holiday has ended will no longer be ignored.

MyTravel (AirTours) The firm has also abolished surcharges in the light of the OFT's concerns. Furthermore travellers no longer have to accept "a suitable alternative" when the company changes arrangements. They can demand to be flown home.

As with Thomas Cook, higher compensation levels can be paid and claims made more than 28 days after the holiday is over are no longer invalid. Compensation for lost or damaged baggage will be increased from (pounds) 400 per person to (pounds) 1000.

Thomson Unlike MyTravel and Thomas Cook, Thomson will surcharge to meet rising costs but will meet the first 2% of any hike itself. Where substantial surcharges apply, customers will be offered a replacement holiday of equivalent or superior quality.

Any compulsory insurance premiums will be refunded if the consumer cancels following a significant surcharge. Also, the company's restricted list of cases eligible for compensation has been abolished. Customers will not have to pay the difference in price on taking a more expensive substitute holiday when the original holiday was cancelled through no fault of their own.

First Choice The company has made similar changes to Thomson's such as surcharges will apply but so will price falls when costs slide. Furthermore, price hikes must not be made within 30 days before departure. And the same new rules apply about substitute holidays and compensation.

The Office of Fair Trading last week also warned consumers about the poor value of extended warranties sold by electrical retailers. Its research revealed that the average cost of repairing a washing machine ranged between (pounds) 45 and (pounds) 65, while a five- year warranty from a retailer costs between (pounds) 150 and (pounds) 300.

Fair Trading director general John Vickers said: "This means the washing machine would need to break down four times for the shopper to be better off with a warranty than without."

Indeed, investigations by the Consumers' Association revealed that 81% of washing machines didn't break down at all during the first six years.

Extended warranties are big business. British consumers currently spend (pounds) 800 million on them, and this figure is expected to rise to (pounds) 1 billion by 2006. However, these contracts are completely unregulated and can leave customers exposed. Yet salesmen love them as they can earn lucrative commission and they can represent a big chunk of overall profits for some high street stores.

It can only happen in an electrical store - salesmen spending more time terrifying customers with horror stories about the likelihood of the item they are attempting to sell breaking down than boasting of its reliability.

A Consumers' Association spokesman suggests: "You are better off spending a few pounds more to buy a reliable make, than skimming on cost and then shelling out for an expensive warranty."

Arguably, the purchase of an extended warranty is false economics. Most goods come with a one-year manufacturer's guarantee anyway, so along with normal consumer protection legislation, you are shielded from problems at the outset.

Furthermore, electrical goods usually break down in the first year - a period during which they will still be covered by the manufacturers' guarantee - if they are going to be faulty. Extended warranties typically offer additional protection, at a very high price for the next two or four years. Yet this is the period when they are least likely to break down.

Some people will be covered anyway. Royal Bank of Scotland Royalties' customers have an automatic additional one-year cover plan after the manufacturer's guarantee ends, and Royalties' Gold account holders benefit from an extra two years.

Barclaycard and Nationwide Building Society offer similar protection for items bought using their credit cards, but you must register the purchase within 60 days.

Sometimes a household insurance policy may cover you for breakdown of electrical goods, or offer cover as a negligible price.

Warranties can take a number of forms. Essentially they are sold by large electrical retailers and are designed to meet repair costs if the machine goes wrong in the first three or five years. But they can easily add up to 50% to the cost of a washing machine, hi fi or television.

On the high street you will typically pay (pounds) 179 for a five- year warranty on a washing machine costing about (pounds) 370, and (pounds) 110 for a 21" colour television, costing 350.

But warranties come in different forms and you need to know which you have. Some are insurance-based, so if you have a problem or the provider goes bust, you can claim through normal financial services channels, such as the Financial Ombudsman and Compensation Scheme.

However, a number of others are service contracts, which have no insurance backing, and which simply disappear if the company goes down.

Tempo, for example, went belly-up leaving half a million guarantees worthless. Those who had paid by credit card were bailed out by their finance agreements, however those who paid by cash got nothing.

Tiny went down leaving 350,000 guarantees uninsured. Its new owner, Time, has made an offer to honour those guarantees, but it is a gesture of goodwill, which could be stopped at any moment.

Other problems can occur. As with all contracts read the small print. With some, if the item purchased breaks down and has to be completely replaced, then the insurance cover is terminated. That may leave you, having paid for five years cover with no protection just a month after purchasing an item.

According to the Consumers' Association there have been instances where warranty firms claim on your other insurance, without telling you, to recover their costs.

This can result in you losing precious no claims discounts, or seeing premiums increase substantially on your household insurances for example.

CA member, Simon Banbury, was appalled to discover he had lost his no-claims bonus on his home contents policy, worth (pounds) 180 because he had claimed for a stolen camera through his PC World guarantee.

There are several alternatives to warranties sold on the high street. NatWest sells an insurance policy which should cover all your electrical goods. You can insure up to nine items for (pounds) 14.99 monthly, which may be considerably cheaper than buying separate policies.

Alternatively you can buy protection direct from an insurer such as Domestic and General, where you might pay (pounds) 170 for a washing machine, (pounds) 110 for a dishwasher and (pounds) 66 for a television.

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