Being in the repair shop or service department at your local dealership is undoubtedly one of the worst aspects of car ownership.
Whether it's the huge number of days the owner loses or the service bills that end up costing an arm and a leg, it's the price of keeping an older car running in tip-top condition.
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Manufacturer warranties only cover what happens to vehicles over a relatively short period of time, and often leave owners with expensive and time-consuming repairs to deal with.
Some companies, like CarShield, try to sell car owners warranties that last longer than the original manufacturer's; however, a new settlement with the Federal Trade Commission shows that companies like these may only be interested in your money.
In a recent ruling, NRRM, LLC, doing business as CarShield and American Auto Shield, agreed to pay the FTC a $10 million penalty to resolve charges that it falsely advertised its aftermarket auto warranties, or “Vehicle Service Contracts” (VSCs).
The government agency, in its report, says that CarShield, which describes itself as “America's most trusted auto protection company,” went so far as to make false promises about the scope of what its products offered and even used celebrity endorsements to promote them in television ads.
According to The FTCCarShield subscribers paid up to $120 a month for their “warranties,” which were, in essence, as good as no warranty at all.
“For many consumers, a personal vehicle is one of their most valuable assets and a vital resource for getting to work, getting their children to school, and obtaining medical care. Instead of providing the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in a statement.
“Even worse, CarShield used trusted personalities to deliver on its empty promises. The FTC will hold advertisers accountable for using false or misleading claims to exploit consumers’ financial concerns.”
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Celebrity bait and switch
These ads featured celebrities such as hip-hop legend and “Law & Order: SVU” star Ice-T and actress Vivica A. Fox, as well as former WWE superstar Ric Flair, who preyed on the average car owner's feelings about costly trips to the mechanic or service department.
“This sleek, slim-cut, limo-driving, business-dominated son of a bitch is here to tell you that CarShield managers make sure you don't have to pay for expensive car repairs,” Ric Flair said before yelling his signature “Woooo!” in a CarShield 2021 Announcement.
According to the FTC, CarShield customers reported that none of the claims in the ads were true. They were unable to get their cars repaired at the repair shop of their choice, as many did not accept CarShield’s VSCs, and CarShield did not cover all of their repairs. Additionally, CarShield customers who had claims denied did not receive a rental car, and even those who did were left to foot the bill for their rentals.
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Old cars still in operation
The FTC's decision comes at a time when car owners are keeping their vehicles for much longer than before. According to S&P Global Mobility dataThe average age of a car, truck and SUV in the United States in 2024 is 12.6 years, driven by high prices for new models.
With 70% of vehicles on the road being six years old or older, mechanics have their work cut out for them. Most vehicles on the road have outlasted most manufacturer warranties.
Fortunately, the FTC is prohibiting CarShield from using the same sales tactics and is requiring the company and its subsidiary, AAS, to inform any third-party marketers about the FTC's decision. The government agency will also monitor CarShield for up to 10 years to ensure it complies with the decision.
CarShield was ordered to pay the FTC $10 million. The agency says it will use the money to reimburse customers who were misled and defrauded by CarShield through its advertising.
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