CarShield must pay $10 million to settle claims that its advertising and telemarketing for its extended auto warranty plans were deceptive and misleading, according to the Federal Trade Commission.
The FTC said Wednesday that it found that many customers paid up to $120 a month, but their repair claims often went unfiled. The FTC also alleged that CarShield’s celebrities and consumer advocates made false claims in its ads, such as “You’ll never pay expensive car repairs again.”
According to the FTC complaint, CarShield advertises and sells car service contracts for between $80 and $120 per month. The ads feature celebrities including sportscaster Chris Brown and actor/rapper Ice-T.
According to the lawsuit, many of CarShield’s ads claim that repairs to “covered” systems, such as the engine and transmission, are covered, or that all repairs are covered, and use language that leads consumers to believe that CarShield will pay for any necessary repairs.
However, the FTC claims that consumers often do not use services that they thought were included in the price they paid, such as the repair facility they chose. Many consumers also find that repairs they thought were included were not included.
“Instead of providing the ‘peace of mind’ that CarShield promised in its advertising, it left many consumers with financial headaches,” Samuel Levin, director of the FTC’s Bureau of Consumer Protection, said in a prepared statement. “Even worse, CarShield used a persona of trust to make empty promises. The FTC will hold accountable advertisers who use false or deceptive claims to exploit consumers’ financial anxiety.”
NRRM LLC does business as CarShield. American Auto Shield LLC is the administrator of the vehicle service contract.
Under the settlement, CarShield and American Auto Shield will be prohibited from making any further deceptive or misleading statements and will be required to ensure that the testimony of its representatives, including celebrities, is truthful and accurate.
“While we disagree with many of the FTC’s assertions, we share the FTC’s commitment to helping customers understand exactly what we offer and the value we provide,” CarShield said in a press release. “That’s why we were pleased to work with the FTC to carefully consider how we can answer their questions and improve our communications with customers.”
The company said its marketing efforts now include adding more information about the elements commonly covered in auto repairs and directing potential customers to a website where they can view the full plan before making a purchasing decision.
CarShield added that it made it clear that all spokespeople appearing in its ads were actual customers.
The FTC urges consumers to do their research when considering purchasing an auto service contract, reminding them of the following:
- Never agree to a contract without first reviewing it. Look for exclusions that deny coverage or limit where you can get your car serviced. Does the contract match the coverage the salesperson described? If not, walk away.
- We don’t need (and don’t want) to duplicate guarantees. Check to see if your vehicle is already covered under an existing warranty. You may already have the coverage you want to purchase.
- Don’t just rely on celebrity recommendations. It is helpful to look at reviews from a variety of sources, such as trusted websites with unbiased expert reviews. Also, beware of fake reviews.
