CarShield, a company that offers extended auto warranty plans, has agreed to pay $10 million to settle charges brought by the Federal Trade Commission (FTC) that its advertisements and telemarketing practices were deceptive and misleading. The FTC alleged that many customers who purchased CarShield’s plans found that their repair claims were often not covered despite making monthly payments of up to $120. Additionally, the FTC claimed that CarShield’s celebrity and consumer endorsers made false statements in its ads, such as promising that customers would never have to pay for expensive car repairs again.
According to the FTC complaint, CarShield advertises and sells vehicle service contracts in a monthly price range of about $80 to $120. The company’s ads have featured celebrities like sports commentator Chris Brown and actor and rapper Ice-T. The complaint alleges that many of CarShield’s ads claim that all repairs or repairs to „covered“ systems, such as the engine and transmission, will be covered, leading consumers to believe that CarShield will pay for all necessary repairs.
However, the FTC claims that consumers often did not 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 actually covered by CarShield. Samuel Levine, director of the FTC’s Bureau of Consumer Protection, stated that CarShield left many consumers with a financial headache instead of delivering the promised peace of mind.
CarShield does business under the name NRRM LLC, with American Auto Shield LLC serving as the administrator of the vehicle service contracts. As part of the settlement with the FTC, CarShield and American Auto Shield are prohibited from making deceptive and misleading statements in the future and must ensure that testimonials from representatives, including celebrities, are truthful and accurate.
In response to the settlement, CarShield stated that while they disagree with many of the FTC’s assertions, they are committed to helping customers fully understand the value they offer. The company has made changes to its marketing efforts, including providing additional details about the elements of car repair typically covered and ensuring that all spokespeople featured in its ads are actual customers.
The FTC recommends that consumers do thorough research before purchasing a car service contract. Consumers should carefully review the contract, look for exclusions, and ensure that the coverage matches what was described by the salesperson. It is also important to check if your car is already covered by an existing warranty to avoid duplicate coverage. Additionally, consumers should not rely solely on celebrity endorsements and should seek out reviews from trusted sources.
Overall, the settlement between CarShield and the FTC highlights the importance of transparency and accuracy in advertising practices, particularly when it comes to financial products and services. Consumers are encouraged to be vigilant and informed when considering purchasing extended auto warranty plans or other similar products.