CarShield will pay $10 million to settle charges that its advertisements and telemarketing for its extended auto warranty plans are deceptive and misleading, the Federal Trade Commission said.
Many customers found that repair claims were often not covered despite making payments of up to $120 per month, the FTC said Wednesday. The FTC also alleged that CarShield’s celebrity and consumer endorsers made false statements in its ads.
The FTC complaint states that CarShield advertises and sells vehicle service contracts in a monthly price range of about $80 to $120. Its ads have featured celebrities including sports commentator Chris Brown and actor and rapper Ice-T.
The complaint alleges many CarShield ads claim that all repairs or repairs to “covered” systems, such as the engine and transmission, will be covered and they use language that make consumers believe CarShield will pay for all necessary repairs.
But the FTC alleged that consumers often didn’t receive the services they thought were covered under their payments, such as using the repair facility of their choice. Many consumers also found that repairs they thought were covered were not.
“Instead of delivering the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a prepared statement. “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.”
NRRM LLC does business under the CarShield name. American Auto Shield LLC is the administrator of the vehicle service contracts.
The settlement prevents CarShield and American Auto Shield from making deceptive and misleading statements in the future and requires them to ensure the testimonials from representatives, including celebrities, are truthful and accurate.
The company did not immediately respond to request for comment from The Associated Press on Wednesday.
—Michelle Chapman, Associated Press business writer