Motor Codes to review Vehicle Warranty Products code of practice

• Motor Codes temporarily suspends Vehicle Warranty Products Code, to investigate protection of ring-fenced payment funds.

• Consultation with OFT and industry stakeholders, to deliver a workable solution and achieve comprehensive consumer protection.

Motor Codes, the automotive industry's self-regulatory body, has opted to suspend its Vehicle Warranty Products code of practice, while it investigates protection given to motorists in the event of a warranty product retailer entering administration. 

A recent case of retail business failure highlighted that the security of ring-fenced funds - those set aside to cover policy payouts - could not always be guaranteed once a retailer is placed in the hands of the court-appointed administrator. 

Chris Mason, managing director at Motor Codes, explains the need for the review of the code, "Subscribers to our warranty code commit to protecting policy payment funds.  If a court-appointed administrator makes this unenforceable, by not recognising the separation of funds set aside for claims payments, customer protection is in question. We've taken the step of temporarily withdrawing our warranty code and will explore alternative ways to ensure that the consumer is not left in limbo should a retail operator fail."

Continuing to offer support to holders of warranty products, Motor Codes will provide advice to motorists contacting its advice line (0800 692 0825) with queries on all vehicle warranty matters, as usual, and dispute resolution services on policies sold before its code suspension date of 9 December.

Demonstrating Motor Codes' continued commitment to consumer protection, Chris said, "This action should not be seen as a retrograde step.  We have reacted to a Motor Codes subscriber highlighting the issues experienced with the administration process as soon as they became apparent.  We are committed to ensuring that consumers can choose a warranty product with confidence and OFT has recognised the importance of this voluntary action.  OFT is keen to work with our subscribers and wider industry stakeholders to seek a practical solution that gives maximum protection to the consumer."

Motor Codes will report on progress of its consultation, with a view to reinstating a robust code for warranty customers.