Texas Attorney General Greg Abbott today charged a California-based telemarketing firm and its owner with unlawfully selling fraudulent automobile vehicle warranties and violating state and federal “do not call” laws.
The action charges Credexx Corp. – which also does business as Auto One Warranty – and its owner, David J. Tabb with illegally contacting Texans whose telephone numbers are on the national Do Not Call Registry or the Texas No Call List.
According to investigators, the defendants marketed their automobile coverage services by making thousands of unsolicited calls to Texas residents. The defendants’ marketing scheme also relied upon fraudulent direct mail solicitations that allegedly failed to disclose material details about the limitations and exclusions of their service contracts.
Further, although the defendants claimed they were selling extended vehicle warranties, those purported warranties were actually nothing more than costly vehicle service contracts.
In a direct mail solicitation obtained by the state, the defendants claimed that their service would provide vehicle owners “peace of mind” and coverage “up to 250,000 miles.” However, Credexx’s mailers failed to disclose that any claim paid under the contracts for repair could not exceed the cash value of the vehicle.
This type of disclosure is important because used vehicle owners purchase the coverage to extend the vehicle’s economic viability by ensuring that repairs are made at a reasonable, affordable cost. Without the disclosure, vehicle owners are not given the necessary information to help them determine if investing in the vehicle service contract is worthwhile to them.
According to the enforcement action, the defendants also employed unlawful and fraudulent sales tactics to sell their products.
For example, the defendants’ sales personnel assured purchasers that their contract could be readily canceled – and that cancelld contracts would be granted quick refunds. However, investigators revealed that the defendants’ customers found it was extremely difficult, if not impossible, to actually obtain refunds.
