An auto service contract company that used illegal telemarketing calls to trick seniors and other car owners into signing up is now barred from operating in North Carolina, Attorney General Roy Cooper said Tuesday.
Automotive Protection of New Jersey is the third company prohibited from selling or pitching auto service contracts in North Carolina in as many months. In November, North Carolina Attorney General Roy Cooper won an agreement with the individuals who ran U.S. Fidelis, formerly the nation's number one seller of car service contracts. In December, Credexx and its owner were banned from doing business in the state.
"Each week, we hear from people who aren't getting their money's worth from auto service contracts," Cooper said. "We're watching this industry closely to protect North Carolina drivers."
Superior Court Judge Abraham Penn Jones on Tuesday granted Cooper's request for a default judgment against Automotive Protection and its manager Christopher Doyle. The judgment resolves Cooper's suit filed against the company in February of 2009.
Under the judgment, the defendants are prohibited from telemarketing in North Carolina and from selling or administering auto service contracts in the state. Any consumer who purchased a contract from Automotive Protection now has the option to cancel it. Automotive Protection and Doyle have also been ordered to pay $4.5 million in civil penalties, which would go to North Carolina public schools.
Not true warranties
Auto service contracts are different from true warranties, which are included in the price of vehicles and offered through the manufacturer. Service contracts are sold separately, usually by third party sellers, for an extra charge. Consumers often pay more than $1,000 for an auto service contract.
Over the years, ConsumerAffairs.com has received hundreds of complaints about various companies selling these service contracts. The most common complaint is the coverage is very limited. Often, the consumer’s needed repair isn’t covered.
These policies are heavily marketed through direct mail and telemarketing, with an implied message that a consumer faces financial exposure if they do not purchase one of these contracts.
Cooper says a total of 25 consumers filed complaints about Automotive Protection calls and sales practices, and the Attorney General's Office was able to work with the third-party finance company to cancel some contracts and save consumers money.
An investigation by Cooper's Consumer Protection Division uncovered that Automotive Protection targeted consumers aged 65 or older and frequently called people who had signed up for the Do Not Call Registry to stop telemarketing calls. The company's telemarketers tricked consumers by pretending to represent car manufacturers and claiming to sell auto service contracts that offered bumper-to-bumper protection.
Consumers were told they could cancel anytime, but those who purchased a contract had a difficult time getting the company to honor their wish to cancel. Cooper says Automotive Protection gave out the wrong contact information to make it hard for consumers to reach the company, refused to answer the phone or return consumers' messages, and claimed they didn't receive the cancellation notices. In some cases, even when consumers cancelled properly, the defendants charged their bank accounts or credit cards anyway.
"Think twice before you respond to a pitch for an auto service contract," Cooper urged consumers. "Do your own research to see if you really want or need extra warranty coverage. Don't just take the sellers' word for it."
Keep the following tips in mind to avoid trouble with auto service contracts:
- Don't fall for urgent calls or letters warning you that your car warranty is about to expire. Be sure to review your current warranty to see if it's still active and don't give in to pressure from salespeople.
- Read both the manufacturer's warranty and the service contract carefully. If they cover many of the same parts for the same period of time, you probably don't need the service contract.
- Read the entire contract before you sign or pay any money. Make sure that any spoken promises are put in writing. If the service contract doesn't say that an item is covered, assume that it isn't.
- Most extended service contracts have a deductible, meaning you'll pay a fee for each repair. Be sure to read the contract to determine if you're required to pay upfront for the repair and then wait to be reimbursed.
- Make sure you are dealing with a reputable seller and are ready to purchase before you give them your bank account or credit card information over the telephone.