CarShield will pay a $10 million fine as part of a settlement with the Federal Trade Commission.
The FTC levied the fine after alleging NRRM, LLC, which operates CarsShield and American Auto Shield, made deceptive and misleading claims in its advertising and telemarketing of its vehicle service contracts.
The FTC said the CarShield marketing, which used many celebrity endorsements, deceptively claimed to cover all repairs for vehicle systems, provide rental cars at no additional cost and allow consumers to use a repair facility of their choice. The FTC’s complaint said many consumers found many shops did not accept the vehicle service contracts, that many repairs were not covered due to many exclusions and many customers had received no rental car with denied claims or having to pay for a portion of the car with approved claims.
The consumers were paying between $80 and $100 for the vehicle service contracts that telemarketers told them that they would only have a $100 deductible for any covered repair.
“For many consumers, a personal vehicle is one of their most valuable assets and a vital lifeline for getting to work, taking their kids to school, and obtaining medical care. Instead of delivering 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. “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.”
The $10 million fine will be used to pay refunds to consumers. The proposed order also prohibits CarShield from making misrepresentations and from failing to make required disclosures.
