Hundreds of thousands of people left out of pocket after they were sold Scottish Power cashback warranties between 1998 and 2001 should be paid their share of about £75 million, a group of MPs said today.
A damning report published today by an All Party Parliamentary Group (APPG) formed to investigate the issue has called for the energy firm to be taken to task by the Financial Conduct Authority (FCA) for allegedly failing to fulfil a cashback promise made to customers. Scottish Power denies any wrongdoing and says it's "extremely disappointed" with the APPG's report.
For what to watch out for when deciding whether to get a warranty, see our Free & Cheap Warranties guide.
How did the Scottish Power cashback warranties work?
The issue concerns a warranty for white goods, such as fridges and washing machines, which was sold under the 'Power Plan' scheme through Scottish Power's former chain of 150 high street stores. Customers were told the cost of the warranty would be paid back in full after five years if they hadn't made a claim.
Scottish Power sold more than 750,000 of these warranties – about 625,000 weren't claimed on and so were eligible for 100% cashback. The parliamentary group puts the total potentially owed to customers at around £75 million.
MoneySavingExpert.com understands the average cost of one of these warranties was around £140, but for more expensive products, like washing machines, it was as much as £400.
Those who didn't claim under the warranty – and were therefore due a full refund – were allegedly left empty-handed after Scottish Power sold its high street stores and insurance arm, Domestic Appliance Insurance Limited, to high street retailer Powerhouse, which subsequently went into administration in 2003.
Andrew Percy, the Conservative MP who chairs the APPG, says there was no doubt in the group's mind that "selling a cashback promise that was neither financially capable of functioning, nor designed to deliver, is effectively fraud on the public".
"Indeed, we do not believe it was in Scottish Power's gift to sell on that promise – which was to their customers – to another retailer in the first place."
He went on to claim that Scottish Power has "been covering it up ever since".
So will those who bought warranties be compensated?
The campaign group Scottish Power Broken Promises says the liquidator that was appointed to deal with Powerhouse's insolvency has so far managed to reclaim some VAT money and recently issued a part-refund to some of those who bought the warranties. However, it says the cheques sent out to affected customers are a tiny fraction of the initial cost of the warranties – in some cases just a few pounds.
MPs on the APPG hope that the no-holds-barred nature of their report will set the ball rolling for the 625,000 warranty-holders to be able to get the full cost of the warranties back.
Speaking to MoneySavingExpert.com, Richard Arkless, a SNP MP who's a member of the APPG, said: "The report shows that Scottish Power needs to account for their behaviour and recommends that the Business, Innovation and Skills Select Committee use its powers to force Scottish Power to provide evidence on the issue, which could be the first step to getting consumers their money back."
Scottish Power Broken Promises says it hopes the FCA could step in.
However it's unclear whether those who bought warranties will be given any further refund. When we asked it today what it was doing on the issue, the FCA declined to comment. MPs on the APPG are due to meet the consumer affairs minister Nick Boles MP next week to discuss the report's findings.
Who should I contact for more information?
If you want to find out whether you're on the liquidator's list of people who purchased one of these warranties, you need to contact The MacDonald Partnership.
What does Scottish Power say?
The energy firm claims that over a period of months it has responded in detail to "a series of allegations that are both factually and legally flawed".
A Scottish Power spokesperson says: "The company is concerned that the findings of the APPG are not only demonstrably wrong but ignore evidence put to the group in writing and some very basic legal principles. This matter has been the subject of a number of reviews which have found no evidence of improper conduct on the part of Scottish Power or its advisers.
"As we have said over a period of years, Scottish Power emphatically rejects any suggestion of wrongdoing in relation to the Power Plan scheme. In addition, this matter is the subject of threatened proceedings and in those circumstances Scottish Power does not propose to comment further."