CarShield Settles FTC Charges for Deceptive Advertising &Telemarketing Practices

CarShield Settles FTC Charges for Deceptive Advertising &Telemarketing Practices

Edited by: TJVNews.com

CarShield, a prominent provider of extended auto warranty plans, has agreed to pay $10 million to settle charges brought by the Federal Trade Commission (FTC) over allegations of deceptive and misleading advertisements and telemarketing practices, according to a report that appeared on Thursday on the Vois Es Nais web site. The settlement addresses numerous complaints from customers who found that their repair claims were often denied despite making substantial monthly payments.

According to the Federal Trade Commission, CarShield advertised and sold vehicle service contracts at monthly prices ranging from $80 to $120. These advertisements prominently featured celebrities such as sports commentator Chris Berman and actor-rapper Ice-T, who endorsed the plans. According to the information provided in the VIN report, the FTC’s complaint alleges that these ads conveyed false assurances that all repairs, or repairs to specific “covered” systems like the engine and transmission, would be covered by CarShield’s plans. The language used in the advertisements led consumers to believe that CarShield would pay for all necessary repairs, providing them with comprehensive coverage and peace of mind.

Contrary to the promises made in the ads, many consumers discovered that the services they believed were covered under their payments were not actually provided. As was reported by VIN, in reality, many customers found that their claims were often denied, and they were unable to use their preferred repair facilities. The FTC argued that these practices left many consumers with significant financial burdens instead of the promised peace of mind.

Samuel Levine, director of the FTC’s Bureau of Consumer Protection, criticized CarShield for failing to deliver on its promises. “Instead of delivering the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache,” Levine stated, the VIN report indicated.  “Worse still, CarShield used trusted personalities to deliver its empty promises. The FTC will hold advertisers accountable for using false or deceptive claims to exploit consumers’ financial anxieties.”

Under the settlement agreement, CarShield will pay $10 million to address the charges of deceptive advertising and telemarketing practices. The settlement aims to compensate affected consumers and serves as a warning to other companies engaging in similar practices, the report added.  The settlement also focuses on the FTC’s commitment to protecting consumers from false and misleading advertising, particularly in industries that prey on consumers’ financial anxieties.

NRRM LLC, which operates under the CarShield name, and American Auto Shield LLC, the administrator of the vehicle service contracts, were both implicated in the FTC’s complaint, the report on VIN said. The settlement enforces strict guidelines on CarShield and American Auto Shield to prevent future deceptive practices. Indicated in the VIN report, the companies are now required to ensure that all statements in their advertisements, including those made by celebrity endorsers, are truthful and accurate. This move is designed to provide consumers with a clearer and more honest understanding of what the service plans actually cover.

In response to the settlement, CarShield issued a statement expressing their willingness to cooperate with the FTC, despite disagreements with some of the commission’s claims. “While we disagree with many of the assertions from the FTC, we share their commitment to helping customers fully understand exactly what we provide and the value we offer,” the company stated, as was affirmed by the VIN report. “That’s why we were glad to work alongside the agency to answer their questions and carefully examine ways to improve our communications with customers.”

CarShield has committed to improving its marketing strategies to ensure greater transparency. The company’s new marketing efforts now include detailed information about the specific car repairs typically covered under their plans. Potential customers are directed to CarShield’s website, where they can view comprehensive details of the service plans before making a purchase decision, VIN reported. This approach is intended to prevent misunderstandings and ensure that consumers are fully informed about the coverage they are purchasing.

As part of the settlement, CarShield has also agreed to clarify that all spokespeople featured in its advertisements are actual customers, not just paid endorsers. This move is aimed at reinforcing the credibility of the testimonials and ensuring that potential customers receive genuine feedback from real users of CarShield’s services.

The FTC’s complaint against CarShield centered on allegations that the company’s advertisements misled consumers into believing that all car repairs, or repairs to “covered” systems like the engine and transmission, would be fully covered by their plans. VIN reported that in reality, many customers found that their claims were often denied, and they were unable to use their preferred repair facilities. The FTC argued that these practices left many consumers with significant financial burdens instead of the promised peace of mind.

The settlement between CarShield and the FTC marks a significant step towards ensuring that consumers receive truthful and transparent information when purchasing auto warranty plans. By committing to improved communication and accurate advertising, CarShield aims to rebuild trust with its customers and provide a more reliable service experience.