— A CarShield lawsuit is settled for $10 million after the U.S. government argued the vehicle warranty company uses deceptive reviews and advertisements to sell vehicle protection plans.
According to the CarShield lawsuit filed by the Federal Trade Commission, CarShield and American Auto Shield use misleading reviews and celebrity endorsements to sell vehicle service contracts.
In advertisements and telemarketing sales pitches for these car warranty service contracts, CarShield promises consumers “peace of mind” and “protection,” making claims such as “you won’t get stuck with another high repair bill” and “you’ll never pay for expensive car repairs again.”
Based in Missouri, CarShield advertises the warranty service contracts administered by American Auto Shield, based in Lakewood, Colorado.
CarShield sells its plans using telemarketers who answer inbound calls and make outbound calls responding to consumers, including those who made website inquiries.
Using scripted statements written by CarShield, the telemarketers pitch the vehicle service contracts and tell consumers whether they use a dealer or local mechanic for the repair work, “there is just a $100 deductible for any covered repair.”
However, the FTC lawsuit asserts consumers do not always get what they think they bought when signing up for the vehicle warranty contracts.
Typically costing $80 to $120 per month, the vehicle warranty service contracts are pushed by multiple celebrities, including sports commentator Chris Berman and actor Ice-T.
But surprise surprise, the FTC determined many celebrities promoting CarShield have never signed up and used any of the vehicle service contracts. In the words of the government, these celebrity endorsers were not "real" customers and had never saved any money from the vehicle warranty contracts.
In addition, the FTC says consumers deceptively claim in advertisements they saved a certain amount of money when none of it was true.
"The complaint alleges many ads claim that all repairs or repairs to 'covered' systems, such as the engine and transmission, will be covered and use language that makes consumers believe CarShield will pay for all necessary repairs." — CarShield lawsuit
For example, one ad that ran 18,000 times on television bragged, "with CarShield’s administrators, they make sure you don’t get stuck with expensive car repair bills like this."
According to the service contract lawsuit, CarShield’s ads deceptively represent:
- All repairs or repairs to “covered” vehicle systems will be paid for under the plans.
- Consumers will receive a rental car at no cost when their car breaks down.
- Consumers can use the repair facility of their choice for repairs.
But CarShield customers complained they couldn't use any repair shop they wanted because the shops didn't accept the CarShield service contracts.
The FTC also found the warranty plans have countless exclusions, and customers who had their claims denied received no rental cars. In addition, even if a claim was approved, CarShield customers claim they were still required to pay a portion of the rental car expenses.
Carshield will be monitored for up to 10 years and has been warned not to make deceptive and misleading statements in the future. CarShield must also ensure anyone who endorses the service contacts must provide truthful and accurate testimonials.
The $10 million monetary judgment against CarShield will be used to provide refunds to defrauded consumers.
The CarShield lawsuit was filed in the U.S. District Court for the Eastern District of Missouri.
