One of the telemarketers who blasted U.S. consumers with millions of illegal auto "warranty" robocalls last year will pay approximately $2.3 million, give up his Mercedes, and be barred from telemarketing, under a settlement with the Federal Trade Commission (FTC). All told, the FTC is collecting nearly $3 million to reimburse victims of the scam.

The settlements resolve charges that Damian Kohlfeld and his two firms made millions of illegal recorded calls to consumers nationwide in an attempt to con them into buying extended auto warranties or service contracts. The robocalls misled consumers into thinking the callers were affiliated with consumers' car dealerships or manufacturers, and that their auto warranty was expiring or about to expire.

Burned

"We were contacted about the 'extended bumper-to-bumper warranty' on our vehicle, " Jimmie of Brandemburg, KY, writes ConsumerAffairs.com. We turned down the offer initially, however they continued calling offering us a better deal or price each time. We eventually decided that it would be to our advantage to take thier offer as our vehicle was getting older."

But he says, when he needed to use the warranty to fix a major transmission leak, "We learned that the warranty did not cover any seals, regardless of how major it was. Then the AC compressor went out on the van, again, we learned that it did not cover any AC problems. It appears that this bumper-to-bumper warranty is confined to only the 'internal' workings of the engine or transmission themselves."

Larry of San Diego , CA, says he was told by a pitchman that, "if I bought the 'no deductable plan' there would be no hassles and the warranty would cover everything my dealer warranty covered. One year later they refused to fix my water pump. Now I can't even get someone on the phone to listen to me."

Earlier this year, the FTC announced a settlement with two other defendants who helped make the robocalls, under which they have paid more than $655,000. The agency also announced a settlement in September 2009 with Transcontinental Warranty, Inc, the company that employed the defendants in this case to make the illegal prerecorded calls.

"Fortunately for American consumers, the telemarketers who were responsible for millions of unsolicited and annoying robocalls will never be able to telemarket again," said FTC Chairman Jon Leibowitz. "We've also taken away all of their money to provide redress for consumers who were defrauded. This case serves as a clear message: telemarketers who violate the privacy of ordinary Americans will have to pay the price."

Do Not Call violations

According to the FTC's complaint, Kohlfeld and the Chicago-based firms Voice Foundations, LLC, and Network Foundations, LLC, violated the FTC's Do Not Call Registry and falsely represented that:

• the telemarketers were calling from, or affiliated with, the manufacturer or dealer of the consumer's automobile;

• the consumer's original automobile warranty was about to expire; and

• the telemarketer had specific information about whether the consumer's vehicle was the subject of a recall.

The settlement requires Kohlfeld to pay more than $2.2 million. In addition, he is required to liquidate two investment accounts totaling approximately $130,000 and to sell his 2006 Mercedes. All of the money collected will be used for consumer redress.

The settlement order also bans Kohlfeld from telemarketing or assisting others engaged in telemarketing, prevents him from making the misrepresentations alleged in the FTC's complaint, and bars him from making any misrepresentations related to the sale of any goods or services.

The order specifically prohibits him from misrepresenting the cost, use, or effectiveness of any product or service or any of the refund policies associated with any product or services.

In addition, Network Foundations will pay $50,000 to be used for consumer redress. Voice Foundations has no assets to pay toward a judgment. If either of the companies later is found to have misrepresented its financial condition, it will be subject to a larger monetary judgment.