By Charlotte Beugge

High street giants Dixons, Comet and Argos have pledged to improve the way they sell extended warranties for electrical goods.

The Office for Fair Trading (OFT) said that measures include providing more information for shoppers and also making available a price comparison website. The move comes after the OFT looked at the £1 billion a year extended warranties market.

The OFT found that only a quarter of shoppers compare different extended warranties before buying, and that shoppers "do not have enough information to make an informed decision".

In particular, it is concerned about Pay As You Go (PAYG) warranties where shoppers pay for the warranty monthly, saying that they can be "considerably more expensive" than fixed-term warranties.

As a result of the OFT's concerns, Dixons, Comet and Argos, which are the largest retail providers of extended warranties, have said they will offer a comparison site, provide information leaflets, do mystery shopping exercises and show how the price of PAYG contracts works out annually.

The OFT is now deciding whether to accept these moves instead of referring the market to the Competition Commission.

Ann Pope, director in the OFT's Goods and Consumer Group, said: "Millions of extended warranties are sold in the UK each year and we remain concerned that, despite recent improvements, this market does not work as well as it could for consumers.

"We welcome the retailers' initiative in offering undertakings and we now want to hear from consumers and others whether they think these will lead to improvements."