Administrators are desperately trying to hammer out a rescue deal for hundreds of thousands of consumers left with worthless extended warranties in the wake of the collapse last month of the PowerHouse electrical chain.
The problem was exacerbated on Friday when PowerPlan, a company responsible for much of PowerHouse’s warranty business, followed the retailer into administrative receivership. News of PowerPlan’s demise comes just weeks before the Competition Commission is due to report the results of an investigation into extended warranties.
PowerPlan was set up to provide service agreements to customers who bought electrical items including washing machines, dishwashers and tumble driers from an extensive chain of electrical shops run by ScottishPower.
This sizeable network was taken over by PowerHouse about two years ago. PowerHouse, which grew to become Britain’s third-largest electrical retailer, was last week rescued by Pacific Retail Group (PRG), a New Zealand electrical giant.
However, the deal struck by Deloitte & Touche, the PowerHouse administrator, was conditional on the acquisition being “free from all former debts and liabilities”, which left customers with warranties high and dry.
PowerHouse offered customers a range of warranty agreements, Deloitte & Touche said. Some were straight insurance schemes that will continue to operate, but others, including Extracare and Easycare, were reserved on PowerHouse’s own balance sheet. This meant that the retailer met all expenses from its own resources. The cover ceased when PowerHouse went into receivership.
The position regarding PowerPlan’s warranties was unclear, the receiver said. A statement was expected by the middle of this week and the company was trying to broker a rescue deal.
If a lifeboat cannot be launched, both PowerHouse’s new owners and ScottishPower are likely to come under intense pressure from customers to honour these policies – although ScottishPower has pointed out that its relationship with the warranty firm ended around three years ago.
The Competition Commission launched its investigation into extended warranties for domestic electrical goods in July 2002 and is due to report this month.
>From The Telegraph