I took the call out of curiosity.
I get several robocalls a week from companies saying my factory car warranty from the manufacturer has expired and I’ll be in a lot of financial trouble if I don’t get an extended plan right away.
Scary letters regularly come with the words “FINAL NOTICE” and “EXTREMELY URGENT”, warning that I must extend my car warranty or I will be financially responsible for all repairs.
I decided to listen to a pitch. All sorts of promises were made, including that I would have bumper-to-bumper coverage.
Then came the discussion about the cost. For the flat rate of about $6,000, I could cover my 2006 Honda Odyssey, which is approaching 200,000 miles. I could also pay for the plan in monthly installments, the seller said.
For that amount of money, I could simply finance major repairs myself, I protested.
No problem, said the seller, lowering the warranty cost to around $5,000. After several price cuts, he finally said he could offer the extended warranty policy for around $3,000.
This type of telemarketing call is repeated across the country. In some cases, it’s a scam. Or, people are paying for a warranty that has so many exclusions, it’s unnecessary, according to the Federal Trade Commission.
This month, the FTC filed a lawsuit against a Florida-based company, American Vehicle Protection Corp., or AVP, and other defendants alleging they defrauded consumers of more than $6 million over the past few years. last four years. The FTC accuses the company of deceptive marketing practices, including misrepresenting to consumers that it was calling on behalf of a car dealership or manufacturer and offering policies that did not provide the extensive coverage promised in the calls with consumers. The FTC also said the company violated the law by calling consumers on the National Do Not Call Registry.
“Once you look at the fine print, which of course people can’t see when they’re talking on the phone, it’s far from a complete guarantee,” said Samuel Levine, director of the Office of Privacy. consumers of the FTC, in a press release. maintenance. “It’s far from bumper-to-bumper coverage. The guards are pretty weak.
The FTC’s complaint says AVP’s extended warranty prices ranged from $2,800 to $3,400.
In a statement and in its own lawsuit against the FTC, AVP argues not only that the FTC is wrong, but also that the agency lacks the authority to seek redress from consumers. AVP’s lawsuit specifically points to a unanimous Supreme Court decision last year that ruled the FTC overstepped by forcing companies engaged in deceptive marketing practices to provide billions of dollars in consumer financial relief.
“While AVP disagrees that it was breaking the law, it has embarked on a comprehensive and unprecedented overhaul of its policies and practices to ensure compliance,” according to the statement sent by e-mail by company attorney, Mitchell N. Roth.
Last year, the FTC received more than 427,000 consumer complaints about telemarketing calls for warranty and protection plans, the vast majority involving extended auto warranty locations.
Consumers are tired of annoying unsolicited calls and often misleading letters about extended car warranties.
“We want to send a clear message that blasting consumers with robocalls, selling them bogus bumper-to-bumper warranties will not be tolerated by the commission,” Levine said.
During testimony before a Senate subcommittee this month, Levine said that during the pandemic there has been a disturbing increase in consumer complaints, with Americans being targeted by predators big and small. .
As consumers struggle to cope with COVID-related price increases, it’s easy to see how many people are turning to these extended warranties to help with expensive repair costs for their cars.
Without specifically referring to the AVP case, Levine talked about the gap between what people think they’re covered when they’re tricked into buying these plans and what’s actually delivered. The FTC has a webpage dedicated to auto warranty policy pitfalls. (On ftc.gov, search for “Extended Warranties and Service Contracts.”)
Consumers should be aware that sometimes warranty coverage duplicates the protection they already have on their automobiles. Often contracts will have major exclusions for the most expensive repairs. Normal wear and tear may not be included. The warranty may only cover a portion of the repair replacement costs based on mileage.
“We see a number of pitfalls in this space where claims made over the phone are not backed up by the actual coverage consumers are getting,” Levine said.
My advice: hang up when you get a call about an extended car warranty plan. Throw this intimidating letter in the recycling bin. Just save the money you would use to pay for one of these plans, which in the end can save you a lot of aggravation.