Junk warranties: Your time is up

Consumer Action Law Centre says a class action to be launched against Australia’s biggest extended car warranty company shows rubbish warranties have had their day.

International law firm Quinn Emanuel today announced a class action against ASX-listed McMillan Shakespeare Group, the company behind the National Warranty Company (NWC).

‘We’ve seen people misled and ripped off by these useless extended warranties for years,’ said Consumer Action CEO Gerard Brody. ‘You think you’re protecting your car, but if you read the fine print, you’re at the mercy of the warranty company. There’s no guarantee you’ll be covered when you need it.’

Consumer Action revealed the scandal of rubbish extended car warranties in its August 2015 report Donating Your Money to a Warranty Company: Why the motor vehicle warranty you bought might be worthless[PDF]. It found that warranty companies can avoid paying many if not most claims by relying on their discretion, or an exclusion under the warranty.

Discretionary risk products give the warranty company discretion as to whether they will pay your claim.

Dealer-issued warranties are ‘administered’ by warranty companies or insurers, who are not legally liable if you make a claim. Often car dealers are also not responsible under the warranty.

‘In short—neither the warranty provider nor the car dealer commits to paying your claim,’ Brody said. ‘On top of this, they include broad exclusions and strict conditions.’

‘People who inadvertently pay for this junk can lose out big time—these warranties are expensive and don’t give you genuine peace of mind.’

‘Consumer Action launched DemandARefund.com to help Australians complain and seek refunds for add-on insurance and warranties.  We’ve seen 280 people claim almost $600,000 in refunds through DemandARefund.com. Twenty percent of these complaints are about NWC—they get the dubious title of ‘most complained about company’. They leave the competition in their dust.’

‘DemandARefund.com has enabled hundreds of people to claim refunds,’ Brody said. ‘But the good thing about a class action is that, if successful, it could see thousands if not tens of thousands of people get some money back on these rubbish warranties.’

‘Warranty companies pay car dealers big sales commissions for selling junk warranties. Dealers are using shameful tactics to convince people to buy warranties, like telling customers that they have to buy the warranty. Warranties are good for warranty companies and car dealers, but are often useless—and expensive—for people who just want to protect their car.’

But the tide is turning on junk insurance and rubbish warranties.

‘Under pressure from the regulator, it seems likely that some insurers will compensate some people who have paid for junk insurance,’ Brody said. ‘It’s obvious that worthless add-on insurance and extended warranties have had their day. But the warranty companies are still trying to squeeze as much as they can out of us when we’re just trying to buy a car.’

Key points

  •       Law firm Quinn Emanuel set to launch a class action against Australia’s biggest extended car warranty company.
  •       ‘Junk’ extended warranties include ‘discretionary risk products’ and ‘dealer-issued warranties’ – they offer no guarantees that you’ll be covered when you need it.
  •       Car dealers are paid big commissions when they sell extended warranties as an ‘add-on’ to your car
  •       Consumer Action’s DemandARefund.com has seen Australians seek almost $600,000 in refunds on junk add-on insurance and extended warranties

More information

Consumer Action report Donating Your Money to a Warranty Company: Why the motor vehicle warranty you bought might be worthless [PDF]

Media Contact: Jonathan Brown, 0413 299 567, media@consumeraction.org.au

Gerard Brody (CEO, Consumer Action Law Centre) and Susan Quinn (Senior Policy Officer, Consumer Action Law Centre) are available for comment.

DemandARefund.com case studies are available for comment.

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