Read the fine print this holiday season and avoid litigation

David Yates Dec. 5, 2007, 7:12am

A new Better Business Bureau survey suggests consumers are neglecting to read the extended warranties, service contracts and return/exchange policies when purchasing goods.

Too often, this "neglect" ends up redefined in lawsuits as "negligence" on the part of the seller, as indicated by the hundreds of breach of warranty lawsuits filed in Jefferson County this year alone.

The BBB national survey, conducted by Kelton Research, found that nearly half (46 percent) of Americans admit they do not read service contracts and more than four in 10 (42 percent) do not look at the extended warranty policies that come with their purchase.

Extended warranties and service contracts are popular with the American public. According to Warranty Week, an online industry newsletter, consumers are expected to purchase approximately $1.6 billion of extended warranties and service contracts on PCs, consumer electronics and major appliances this holiday season, a BBB press release said.

"There's an on-going debate about whether extended warranties and service contracts are worth the up-front cost," said Michael Clayton, President/CEO of the Better Business Bureau in Southeast Texas. "The bottom line is that consumers need to make sure they completely understand the terms and weigh the value of purchasing one versus the potential need for repair or replacement over time."

In addition to extended warranties and service contracts, surprisingly, nearly three in 10(29 percent) adult consumers don't carefully read return and exchange policies when making a purchase in a store or retail outlet, the press release said.

"The number of people who don't read return and exchange policies carefully is concerning," Clayton said. "Though they are commonplace, not every retailer has the same policy and some establishments even implement separate policies around special sales and holidays."

Prior to the 2006 holiday season, the National Retail Federation (NRF) released a survey indicating that more than one in three consumers (37.6 percent) were expected to return at least some portion of their holiday gifts.

And, in a more recent survey released earlier this month, the NRF found that consumers will not see a drastic shift in holiday return policies this year, with four in five retailers (81.4 percent) implementing the same holiday return policy as last year – while 15.3 percent will tighten their policies (vs. 25.0 percent in 2006) and 3.4 percent will loosen policies (vs. 4.8 percent last year), the press release said.

"We encourage consumers to carefully read and make sure they understand any and all policies that come with their purchase. In the long run it can save them a lot of time and money," Clayton said.

The BBB is advising consumers to take the following steps to help them shop wisely:

- First, read the terms of the warranty or contract carefully before purchasing;

- Take your time before buying one. Many extended warranties and service contracts don't have to be purchased at the point of sale and can be purchased at a later date up to a specified period of time;

- Make sure you understand what the policy covers (parts, service, shipping, etc.) and be clear about what is covered under accidental damage versus product failure;

- Anticipate and calculate what it would cost for average repairs over the specified time period of the contract and compare it to the total cost of the service contract. If the product has a track record of not breaking down or needing average repairs over that specified time period, then the service contract could end up costing more money;

- Make sure you don't duplicate coverage. Some protection may already be covered for a specified period of time under what is known as "implied warranty" depending on state laws. And, sometimes you may even be covered for a certain period of time through your credit card if you use it to purchase the product or service;

- Be sure to understand the cancellation terms. Some state laws require a "Free Look" period, which allows you to get a full refund if you change your mind within a specified period of time. Some contracts can be transferred to a new owner;

- If you choose to purchase a service contract, make sure to keep the service contract paperwork, receipts, and all maintenance records together;

For returns and exchanges:

- Make sure to keep receipts. If giving a gift, ask for a gift receipt and enclose it with the present;

- Read the retailer's policy before you purchase products. Make sure you understand whether you or the recipient of your gift can get a refund, exchange or store credit for unwanted merchandise. Also, if returns are permitted, ask what procedures and timeframe need to be followed;

- Understand what the return policies are for on-sale and clearance items, which may be different than merchandise sold at full price;

- Don't remove electronics or similar products from their boxes before wrapping because the original packaging may be required for a return;

- Some merchants charge a restocking or "open box" fee for returns of electronics products or large-ticket items. Ask if that is their policy;

- Be sure to look for return policies when buying online or from catalogs. Sometimes merchandise can be returned to a store; otherwise, you may be charged a shipping fee to return or exchange an item.

For more information about BBB, visit or call 409-835-5348 or 800-685-7650.

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