Despite rising public awareness of problems in the nation’s vehicle service contract industry, consumers continue to tell Better Business Bureau they feel tricked by misleading advertising or duped into spending thousands of dollars for contracts with little or no value.
Typical is a complaint received last month from a Fort Lauderdale, Fla., consumer: “I pay on time and follow all terms of the policy but they won’t cover anything.”
Another consumer, from South Holland, Ill., made a similar claim last month: The company has “fraudulently taken my money with no thought of ever (paying for repairs).”
A consumer from Ladson, S.C., who said she received a misleading mailer from a vehicle service marketer in April, was more blunt: “These guys were slime.”
BBB suggests caution to consumers who may be considering purchasing a vehicle service contract. A BBB study released earlier this year concluded that consumers had lost millions to the purchase of vehicle service contracts.
In the past 12 months, BBB has received nearly 800 complaints involving 24 auto service contract companies in the St. Louis area, most in St. Charles County. While now-defunct US Fidelis has received the biggest number of complaints – 200—three other firms have received at least 60 complaints during the 12 months. Those companies are:
- National Dealers Warranty, doing business under the name Stop Repair Bills, of St. Peters, Mo. Consumers have filed 187 complaints and reports about this company during the 12-month period and 523 in the past 36 months.
- Service Protection Direct or Protection Direct with headquarters in downtown St. Louis. Consumers have filed 76 complaints and reports about the company in the 12-month period and 298 in the past 36 months.
- Car Safe or Dealer Preferred Warranties, of St. Charles, Mo. The company has been the focus of 68 consumer complaints over the 12 months and 167 in the past 36 months.
Each of these businesses has an “F” grade with the BBB, the lowest grade possible and all have been the target of lawsuits filed by the Missouri attorney general’s office.
Consumers claim a variety of concerns with the businesses, each of which uses telemarketers to sell vehicle service contracts to the public.
Complaints allege misleading mailers or sales pitches, difficulty obtaining copies of contracts, difficulty obtaining refunds after canceling contracts and difficulty getting payment for repairs consumers thought should have been covered. The companies maintain that their ads and sales are not misleading and that those who administer the contracts – and not the sales companies – decide when and how much to pay for repair work.
Kim States, BBB President, said recent consumer complaints highlight continuing problems with the industry.
“The stories from consumers have changed little since the days, just a couple of years ago, when US Fidelis was the nation’s biggest seller of these contracts,” she said. “Recent news coverage has gone a long way toward educating consumers about this industry, but, unfortunately, too many people are still being hurt.”
Earlier this month, brothers Darain and Cory Atkinson who founded and ran US Fidelis, were charged with multiple counts of unlawful merchandising practices, stealing and insurance fraud in connection with their operation of the company.
BBB offers the following advice for consumers considering purchasing a service contract for their vehicles:
- Always read your contract thoroughly and make sure you understand it completely before paying for coverage.
- Never give any personal or credit card information to anyone over the phone or via e-mail until you are ready to purchase a contract.
- Do not be pressured into making an immediate decision. Beware of any sales offers that require you to buy immediately in order to qualify for the best rate.
- Beware of any claims that you will receive “total” or “bumper to bumper” coverage on your vehicle. That does not necessarily mean that every problem with your car will be covered. Look for conditions and disclaimers.
- Read your manufacturer’s warranty and contact your dealer or manufacturer to make sure you are not purchasing duplicate coverage.
- Do the math. Sometimes the cost of a service contract may be more than the value of the car.
- Check the contract seller’s BBB Business Review by going to www.tucson.bbb.org or by calling (520)888-5353. Do not be misled by marketers who suggest that you check the review for contract administrators and not the brokers themselves.