CarShield will pay $10 million to settle charges that its advertisements and telemarketing for its extended auto warranty plans are deceptive and misleading, the Federal Trade Commission said.
Many customers found that repair claims were often not covered despite making payments of up to $120 per month, the FTC said Wednesday. The FTC also alleged that CarShield’s celebrity and consumer endorsers made false statements in its ads, such as “you’ll never pay for expensive car repairs again.”
The FTC complaint states that CarShield advertises and sells vehicle service contracts in a monthly price range of about $80 to $120. Its ads have featured celebrities including sports commentator Chris Brown and actor and rapper Ice-T.
The complaint alleges many CarShield ads claim that all repairs or repairs to “covered” systems, such as the engine and transmission, will be covered and they use language that make consumers believe CarShield will pay for all necessary repairs.
But the FTC claims that consumers often didn’t receive the services they thought were covered under their payments, such as using the repair facility of their choice. Many consumers also found that repairs they thought were covered were not.
“Instead of delivering the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a prepared statement. “Worse still, CarShield used trusted personalities to deliver its empty promises. The FTC will hold advertisers accountable for using false or deceptive claims to exploit consumers’ financial anxieties.”
NRRM LLC does business under the CarShield name. American Auto Shield LLC is the administrator of the vehicle service contracts.
The settlement prevents CarShield and American Auto Shield from making deceptive and misleading statements in the future and requires them to ensure the testimonials from representatives, including celebrities, are truthful and accurate.
“While we disagree with many of the assertions from the FTC, we share their commitment to helping customers fully understand exactly what we provide and the value we offer,” CarShield said in a release. “That’s why we were glad to work alongside the agency to answer their questions and carefully examine ways to improve our communications with customers.”
The company said that its marketing efforts now include additional details about the elements of car repair typically covered and direct potential customers to its website, where full plans can be viewed before making a purchase decision.
CarShield added that it is also making clear that all spokespeople featured in its ads are actual customers.
The FTC recommends that consumers do research when considering buying a car service contract and offers the following reminders:
- Never agree to a contract you haven’t looked at first. Look for exclusions that deny coverage or restrict where you can get your car serviced. Does the contract match the coverage the salesperson described to you? If not, walk away.
- You don’t need (or want) duplicate coverage. Check to see if your car is already covered by an existing warranty. You might already have the coverage you were looking to buy.
- Don’t rely on celebrity endorsements alone. It’s helpful to look at reviews from a variety of sources, like trusted websites with impartial expert reviews. Also be on the lookout for fake reviews.
