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High hopes for builder warranties

NEWSTrade body guarantees may dodge regs

THE FINANCIAL Services Authority has given fresh hope to trade associations that fear that thousands of members could be prevented from offering insurance-backed warranties to customers by a European directive.

The trade bodies - which include the Federation of Master Builders and the Electrical Contractors Association - have been lobbying the FSA over the potential impact of the European Commission's insurance intermediaries directive.

Bob Adamson, managing director of ECIC, who insures most of the ECA's members as well as the Government's Quality Mark scheme, has been in talks with the FSA's head of insurance Alison Hewitt.

ECIC business development manager Richard Forest-Smith said: 'There is a dialogue that is not resolved because of the directive's complexity but the FSA is making encouraging noises.

'The directive says that contractors gaining a commercial advantage by offering warranties should be subject to the new rules but many firms are members of schemes - such as Quality Mark - where they must offer warranties, so commercial advantage does not apply.'

Trade associations fear the directive - which comes into force in January - could prevent small businesses from offering warranties because they would be classed as 'intermediaries'and subject to the regulations.

Individual builders offering insurancebacked warranties would be subject to the FSA's heavily involved regulatory process, have to gain a host of professional qualifications, and obtain professional indemnity cover for up to £670,000.

In the worst-case scenario, small firms could be forced to become 'introducers' - handing customers leaflets on warranties, but not signing them up for fear of breaking the law.

Mr Forest-Smith fears the regs would involve laying out hundreds of thousands of pounds.

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