From January 15, dealers who are not registered with the Financial Standards Authority (FSA) or as an agent of an approved insurer, will be prevented from selling insurance related products like mechanical breakdown warranties.
After this date, registered dealers will not only have to comply with strict guidelines, which include a right to cancel after 14 days, but inform consumers of the terms and conditions and any exclusions within the policy.
Duncan McClure Fisher, of Warranty Direct, says: "Every week, we receive SOS calls from car buyer’s who’ve been sold a policy that is quite simply not worth the paper it is written on.
No sensible person would buy a warranty that only provides cover up to a £500 limit when the excess is £200 if they knew about it.
"Yet, unless they have had the opportunity to go through the legal speak print, this is the kind of policy that you could end up with."
McClure Fisher believes that the need for dealers to be more transparent will lead to a shake-up of the market, and eventually, the end of the ‘worthless’ warranty.