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FTC says CarShield shielded consumers from the truth about limitations of its vehicle service contracts
If you haven’t caught CarShield’s pervasive ad campaign for vehicle service contracts, you may be one of the few people who should spend more time watching TV. Ubiquity aside, what you really need to know about CarShield’s ads is that the FTC has challenged them as deceptive. A $10 million proposed settlement addresses allegations that the company made misleading claims about what the service contracts cover, deceptively represented that consumers could get repairs at the shop of their choice, used deceptive celebrity and consumer endorsements, and violated the Telemarketing Sales Rule.
The complaint names two related players behind the CarShield promotions. Defendant American Auto Shield determines the purported coverage and eligibility criteria for each vehicle service contract type, ranging from the “Silver” plan all the way up to the “Diamond” plan, with consumers shelling out between $80 to $120 per month. According to the complaint, American Auto Shield is responsible for adjudicating and paying customers’ claims. Defendant CarShield creates the ads and manages the marketing, although the parties’ contract gives American Auto Shield a significant say in the content.
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CarShield’s ads allegedly conveyed that the vehicle service contracts protect consumers from unexpected repair costs after their manufacturer’s warranty has expired. The ads pitched “protection” and “peace of mind,” promising customers “you’ll never pay for expensive car repairs again.” In addition, the ads got specific with the kind of coverage consumers can expect. According to one ad, “CarShield has plans that can help cover major parts and systems for out-of-warranty vehicles. So when they break down, you’re not the one stuck with the bill.” Promising “no big bills,” another ad claimed, “If my car breaks down, I can count on CarShield to cover it for me.”
In addition to touting their own Shield Repair Network of repair facilities, the defendants assured consumers that “When your car needs repair, you take it to your favorite mechanic or even your dealer, and CarShield gets them paid directly.” According to the company, “There are even plans that will pay for your rental car while your car’s in the shop.”
For consumers still on the fence, CarShield featured endorsements by professional athletes, including basketball player Allen Iverson, pro wrestler Ric Flair, and baseball players Walker Buehler, Pete Alonso, and Matt Vierling. Other ads showcased sportscaster Chris Berman and actors Ice-T, Vivica A. Fox, Adrienne Janic, and Ernie Hudson – all of whom were represented to be “customers” or even “real CarShield Customers.”
The ads also highlighted consumers making specific claims about how much money they saved through a CarShield vehicle service contract. According to one consumer, “I’ve been a CarShield customer for close to seven years, had three vehicles covered, and they saved me close to $9,000.” Another consumer claimed that “If I didn’t have CarShield, I would have been out-of-pocket $7,000.”
All the TV ads – as well as promotional mailings – feature a phone number for consumers to call if they have questions or want to enroll. According to the complaint, once telemarketers have consumers on the line, they work from approved scripts to turn up the temperature on the sales pitch. For example, telemarketers promised consumers that with the Diamond plan, “[J]ust like when the vehicle was NEW, this covers your Engine, Transmission, Drive Axle, Suspension, Steering, Fuel System, A/C, and even your Computers and High-Tech Electronics!” Consumers also were told they could “pick the dealer or ASE certified mechanic you want to use, and there is just a $100 deductible for any covered repair!” and that their vehicle service contract includes a rental car “at no extra cost.” According to the complaint, consumers who didn’t sign up during that initial call could expect to get multiple follow-up calls from CarShield telemarketers designed to seal the deal. It was only after buying a vehicle service contract that consumers received a dense 25-30 page document packed with exclusions, terms, and conditions that weren’t disclosed in CarShield’s ads or by its telemarketers.
What happened when the rubber met the road? The FTC says it wasn’t until many consumers’ cars broke down and they tried to exercise their rights under their vehicle service contracts that they learned the defendants deliver substantially less than what was promised. According to the complaint, “In many cases, only after experiencing a vehicle breakdown and attempting to use their [vehicle service contracts] do consumers realize the representations made by CarShield’s advertisements and telemarketers are false or misleading.”
For example, despite the defendants’ assurances, many consumers couldn’t use the facility of their choice for repairs. According to one consumer, “Everyone laughs when I ask if they accept CarShield as coverage.” Another consumer reported, “[I] called around, no shop within reasonable distance will accept CarShield. Answer from each shop has been ‘no, because they don’t pay their bill.’” Other consumers claimed that even some facilities the defendants advertised as members of their Shield Repair Network want nothing to do with CarShield.
If consumers were able to find a repair shop willing to accept CarShield vehicle service contacts, in numerous cases, American Auto Shield has invoked a host of exclusions that aren’t clearly disclosed in CarShield’s ads or by its telemarketers. In fact, none of CarShield’s service contracts cover all repairs or even repairs to “covered” vehicle systems. The upshot: the FTC says many consumers who paid big money for vehicle service contracts were left holding the bag – and paying the bill – for pricey repairs the defendants had led them to believe would be covered.
The complaint alleges that the defendants violated the FTC Act by making misleading claims about what their vehicle service contracts covered, by falsely promising consumers could use the repair shop of their choice, and by making deceptive promises that customers would have access to rental cars. The FTC also says the defendants’ testimonials were deceptive in that the celebrities either weren’t actual customers or had never used a CarShield vehicle service contract. According to the complaint, the consumer testimonials were misleading because the people didn’t actually save the depicted dollar amounts. In addition, the FTC alleges the defendants’ misrepresentations and omissions violated multiple provisions of the Telemarketing Sales Rule and that American Auto Shield also assisted and facilitated TSR violations.
In addition to $10 million in redress for consumers, the proposed settlement prohibits CarShield from making misrepresentations related to any goods or services, prohibits misrepresentations about endorsers’ experience with a product or service, and requires American Auto Shield to tell third-party marketers about the order and to monitor their advertising. The settlement also requires compliance with the Telemarketing Sales Rule.
The action offers across-the-board compliance advice for other businesses.
Explain the details of the deal up front. A vehicle service contract is no different from any other consumer transaction. It’s the company’s responsibility to be crystal clear about material terms and conditions before the consumer makes the purchase. According to the FTC, the defendants had ample warning that consumers were surprised by the numerous exclusions. In addition to public alerts issued by two BBBs, CarShield reached settlements with Missouri and Georgia regarding their practices. The FTC lawsuit also cites internal corporate communications about a “pattern of . . . complaints regarding coverage misunderstandings.” Of course, the wisest course of action is to make sure the details of the deal are clear from the outset. But conscientious companies also monitor consumer complaints and discontinue tactics that cause confusion.
Has your company received a Notice of Penalty Offenses from the FTC? Take it seriously. In September 2022, the FTC sent CarShield a Notice of Penalty Offenses Concerning Endorsements, identifying certain practices the Commission has determined to be deceptive or unfair – specifically, falsely representing an endorser as an actual user of a product or service. But even after receiving the Notice, CarShield allegedly continued to deceptively describe certain athletes and celebrities as customers or users. If your company has received any of the FTC’s Notices of Penalty Offenses, conduct a compliance check to make sure your practices comport with the law.
Review your obligations under the Telemarketing Sales Rule. “But we don’t cold call random people during the dinner hour, so the Telemarketing Sales Rule doesn’t apply to us.” We’ve heard that from too many businesses that have ignored the broad scope of the TSR, which defines “telemarketing” in part as “a plan, program, or campaign . . . to induce the purchase of goods or services.” Certainly, those unwanted and annoying calls consumers complain so much about are subject to the Rule, but as the FTC complaint establishes, many types of calls are covered.
- Outbound calls initiated by telemarketers are subject to the TSR. No matter why a telemarketer places a call – whether in response to a consumer’s online inquiry, a consumer’s request for a callback, or for any other reason – the TSR requires telemarketers to tell the truth. CarShield called consumers who filled out online quote requests. It also made follow-up calls to consumers who declined to buy a vehicle service contract during an earlier call. Some of those consumers may have even asked to be called back, but because the calls were initiated by CarShield, they were subject to the TSR’s prohibitions against deception.
- Some inbound calls initiated by consumers are also covered. The TSR exempts calls by consumers in response to direct mail ads that are addressed to particular recipients only if the ads clearly disclose – among other things – all material restrictions, limitations, or conditions. Because CarShield’s direct mail ads were addressed to specific consumers, but lacked the required disclosures, inbound calls made by consumers who received those ads were covered by the TSR.
- Upselling, including many common retention techniques, is covered by the TSR. When consumers called CarShield to cancel, a retention agent tried to persuade them to keep their contracts by sweetening the deal with discounts. This form of upselling falls within the TSR, whether it takes place during an inbound or an outbound call.
If your business makes or receives these types of calls, familiarize yourself with the Telemarketing Sales Rule, especially its prohibitions against deceptive conduct. These prohibitions are separate from the Do Not Call provisions and apply even when the call itself is permitted by the TSR. Businesses that violate the Rule can face hefty civil penalties, so compliance is cost-effective. Consult FTC resources on the Telemarketing page.
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August 07, 2024
I had car Shield in 2019 they cost me 5,000 of which they did not pay for my car to get fix .I contacted the consumer report nothing was done.At that I had no help from anyone,so I just had to pay it.Please let me know how i can get information about the class action lawsuit.Thank you
August 08, 2024
Carshield needs to be sued for more than $10 million dollars. I joined them in 2021 and was never able to get anything done! They gave me a military rate...but after attempting to get my car repaired, they wouldn't cover it. This company shouldn't even be allowed to do business. Needless to say, I dropped them. I am joining this class action lawsuit against them.
August 08, 2024
I had car Shield in 2019 they cost me 5,000 of which they did not pay for my car to get fix .I contacted the consumer report nothing was done.At that I had no help from anyone,so I just had to pay it.Please let me know how i can get information about the class action lawsuit.Thank you
August 08, 2024
I, unfortunately, went through this as well. How can I be a part of this claim?
August 12, 2024
In reply to I, unfortunately, went… by DeAnna
Its Ashamed we didn't get payed from the settlement we as the consumer, be from hell and back. Because of Car Shield I could not pay for my repairs that was needed, I had to get another car. Also it's a lot if dealerships if you tell them you have Car shield they won't accept it. But they advertisement say you can go to your dealership which was a lie. I have a car note now because they would not pay for my repairs there sent me though because they would not pay for my repairs. When I watch TV and they come on still advertisement a lie. I wish they would cut it off TV so they won't hurt no one esle. Lou fuse dealership will not take Car Shield they know they won't fix your car & they don't want to waste there time on car shield so they will tell you if y have car shield it's a no.
August 12, 2024
My car was diagnosed with a left broken axal and the right one had so many miles before it would be gone and cause serious accident. 700 dollars to repair. Dealer said they had problems with carsheild not paying. I called all excited that I had help with having their coverage. They quickly pulled my contract and said no you are not covered. I'm so angry with them. They've caused me to get behind on my bills because of over 100 dollars a month and I'm on fixed income and I get nothing from them. I don't recommend them because they are misleading. Can I sue them
August 12, 2024
How do I sign up for this claim
August 12, 2024
I have had carshield for at least 5 years & I have used them 3 times & my deductible was supposed to be $100, but it has always costed me way more than the $100 deductible.
If there is a class action lawsuit on them I would like to be included or at least have information on how to get included.
Thank you,
Deborah Papadakis
August 12, 2024
How do I get in on this claim? They are a rip off and I think everyone should be reimbursed all there payments that they paid.
August 12, 2024
I had car shield and they denied my claims after the mechanic shop sent them all the information that they needed.
August 12, 2024
I had car shield for a little over a year. My car start having issues and was denied repairs at first, then they decided to do only a minimal amount of the work. I later canceled and still sometimes I receive calls from them
August 12, 2024
Took truck to Dobbs for power steering they said it wasn't cover. had car shield for year 130 a month please add me too law suit
August 12, 2024
Good! I paid them $150 and change from Nov of 2023 to April 2024 and them called to cancel due to cost and then they decreased my payments to $108 from May to June of 2024. My truck engine "died" and they denied my claim due to some oil leak that occurred in 2022 on a oil change receipt. They told me that in some clause in my contract that they could deny my claim due to a maintenance issue like oil. I had not other oil issues reported to me with my 2010 truck. So I was let with having to sell my 14 year old truck, that I had had for 13 years and buy a new vehicle because they refused to cover my engine.
August 13, 2024
I had car shield and I was very dissatisfied with.Them they left me hanging on a couple of repairs, How do I get in on the lawsuit
August 13, 2024
I've had car shield for years. I keep hoping that they do what they say. But I just found out that they don't. I had a 2013 Chevy Cruze with a blown engine. They wouldn't fix it and I couldn't so I had to let the loan company repossess it.
How do I join the lawsuit.
I still have 1 policy with them
August 14, 2024
I have just been turned down by carsheild and they did that exact thing to me I would like to see if I can get on that lawsuit they treated me so dirty declined my claim when i had been covered for almost 10 years.
August 14, 2024
I used to have a CONTRACT with car SHIELD but I cancel my contract because they won’t pay. How can I get in on the settlement?
August 14, 2024
We’re can I get a $100 dollars deductible,,because I pay a &250. Dollar deductible and I don’t pay $80 dollars fee I pay $149 dollars.
August 14, 2024
Always a bunch of snakes
August 15, 2024
Had a transmission problem and Car Shield kept me hanging for 7 months with some excuse or another about 4 years ago. Wrote a letter to the BBB and at that time they said nothing could be done. REALLY, kind of looks like they finally did something. Car Shield never did fix my car. Had to borrow money from a friend to finally fix it. Went into BIG time debt. Where can I get some of that money?
August 15, 2024
How do I get included in this claim. I was paying 120$ every month. Everytime I would file a claim they always denied it.
August 19, 2024
I had a contract with car shield for about two years and when I needed them they decided they would only pay what I paid into it. The bill was almost $10,000. They gave me back the 1400.00 I put in and wouldn't even talk to me anymore. They are cheaters and not very caring at all.If theres a lawsuit I would really like to get my 8,000.00
August 21, 2024
Carsjeild sent 2 bad transmission when my 1500 Dodge ram transmission went out they replaced it with a used transmission it took over a month or two
August 21, 2024
How do I file a claim
August 22, 2024
I have had carsheld for three years and every time I have an issue the claim is denied. Now my transmission is going out and they refuse to fix it.
August 26, 2024
The same thing happened to me when I needed car repairs. They gave me and the mechanics the run around and at the end of the day I was left with a $3700 car repair bill. I really want to know how to be added to this lawsuit, it’s about time someone went after them.
August 28, 2024
Have my vehicle in for service, front head light went completely out due to an electrical issue with the unit and Car Shield is refusing to pay for any repairs stating they don't cover headlight units but explained to them that it's an electrical issue with it. This company is misinforming and all they want is the consumers money and nothing in return. I have the highest plan they offer, platinum and refusing to cover the repairs. I have paid out over $2,000 in monthly premiums and how can they be so cruel in not covering an electrical component. I was promised that this plan I choose covered all electronic failures and now being told they don't cover it. It's complete false advertisement to the people of the public and all they want is the consumers hard work money.
August 28, 2024
I have been paying carshield $79.99 per month for 7 years. They wouldn't pay for an alternator years ago
I had 68000 miles on the vehicle at onset of coverage. I now have 168000. I have called twice and they have assured me I am covered for life. Starting to suspect that's not true
August 28, 2024
I had a problem with my air conditioning unit and they would not cover it. I had had car shield for two years. This was my first claim and it was denied.
September 05, 2024
I pay Carsheild for two years for coverage on my 2016 escape with my car starts to run hot. I took a tour mechanic his first diagnosis was the oil shield on the motor needed to be fixed which was covered under Carsheild. It took them three weeks I waited more than three weeks for them to finish so I took the car to another dealer Was told to I
Dismantle my Moto, so I’m insurance adjuster could come out and look at it. He dismantled my motor and then told the mechanic that they don’t cover anything. Meanwhile, my motor is in every piece that can be dismantled. My car has not been drivable since I was told too bad, I am mad as hell I’m 80 years old the way they talk on TV. They should be sued for slander and I want to know about the lawsuit. How do I get in on the lawsuit I need my money back for my car
August 29, 2024
Carshield chose a repair shop for me to take my vehicle, it was towed by a service Carshield called and I paid the over mileage limit difference. I gave the carshield contract to repair shop and left the car. The parts are covered by the contract but carshield refuses to pay because repair shop didn't call them before starting to work on car even though this is the shop carshield chose and had it towed to. The repair is $1300.00 and carshield will not pay. I cancelled my contracts with them and I want them to pay the $1300.00 for the contract covered repair. Item failed "TCM HARNESS"
September 03, 2024
I was made to pay $4000 on My transmission to car car shield $8000 when My deductible should had been $100 I’m glad you all investigated this cause I had no way of explaining Thanks and can you help Me get reimbursed
September 03, 2024
I did trust this company and paid monthly for over 3 years
I hope to receive a refund this coverage was so important to me, only to find out it probably was useless.
September 03, 2024
I have paid carsheild since 2021 when I purchased my used car. I didn't know it was a class action lawsuit against this company until today, I thought it was strange that I couldn't get into my account. I was informed that the company closed, and they were still taking money out of my bank account. I would like to put in a class action lawsuit how would I get the application. Thank you
September 09, 2024
How do I get in on the lawsuit? I had Carshield for 3yrs and they NEVER PAID A THING!!
I FINALLY CANCELLED MY POLICY THIS YEAR.
September 09, 2024
Where and how to find information to register for the compensation?
CarShield and American Auto Shield will not approve my claim and pay out what my contract promises they would cover. They are refusing to pay for the ac compressor which is coverd under my warranty with this company. They basically lied to me and deceived me. I have been paying Car Shield for years and this is the first time I put in a claim because my AC started blowing warm air. I took my SUV to PepBoys for a diagnostic test on the ac and it revealed what repairs were needed. I knew the repairs were covered. Pepe Boys gave the the diagnoses and cost of the parts and repairs needed, but CarShield and American Auto Sheild refuse to repair it demanding that unless PepBoys break open my compressor to take a photo to see if any fragments were in it. This MADE NO SENSE to PepBoys as they tried over and over to explain to AAS that do to that was not only impossible but it would also cause uneccessary damage that would cause me to lose warranty on the compressor. PepBoys also informed AAS that the compresor had a warning lable that if opened the compressor would fill with fluid which would need a dryer. AAS refused to approve the compressor kit which is only sold with the dryer. They refused to cover the kit and refused to cover the compressor unless the compressor was broken open and pics to prove particles were inside the compressor. It made NO SENSE! Im so upset over this. I feel ilke Carshield and AAS was not honest and I've been deceived! They took my money which was thousands of dollars and I believe these companies had no intention of ever paying out for any repairs. Basically I now have to pay over $1700 out of pocket for a repair that I've been covered for under a warranty company that had no intention on paying. This company is a scam! I want all of my money back I've paid them over the years. please let me know how I can be compensated?
September 16, 2024
How do I become part off the class action law suit please send me the information
September 16, 2024
Paid $5000 into car shield; they never helped me!
September 24, 2024
I would like to know how to file also on this lawsuit.
I had my car in the shop to get a motor replaced while I was under car shield it was in the shop for 5 months it took forever for them to find a used motor and it had rest all over it when it was shipped and the dealers still put it in my car stating it's probably going to have issues down the road my car has never run the same since I called carshield and told them. Nothing was done I was told if I kept my policy they would replace the motor if anything happened to it and it quit running so I feel like I'm going to catch 22 I have to keep this policy to keep my used motor that they put in covered.
September 27, 2024
I have been denied a claim because my miles originally reported were inc. I called an updated and corrected the miles and they are still refusing to honor the claim even though I'm in compliance of the waiting period. I am a recovering stroke patient as well. How do I join this or any subsequent suits or complaints?
September 28, 2024
I purchase a contract with CarShield back On June 4, 2023. After 4 months I didn't make any additional monthly payments. They are nothing else but scam artists. I took my truck in to the dealer for repair and when I told them I had CarShield, they basically laughed and said that CarShield doesn't pay for your total bill. When I called the customer service rep at CarShield she told me they would only pay what they would feel they should pay. So my bill was over $4,500 and they would only pay around $250 approximately. I just called them to get some sort of credit back from my monthly payments and Andre, the representative on the phone, told me I could only get my money back after the 1st initial payment, 30 days. They are a bunch of thieves. I cancelled my credit card so that they would not continue to charge me as it was setup as auto monthly payment. If there is anyone out there that can guide me, us, victims of this scam, please let us know.
September 30, 2024
here while back, i spoke to a carshield representative about having my car air conditioning and window motors fixed and was told neither repair would be covered because it was considered 'a pre-existing condition'...so, what's the point of buying this type of program? how can a person know when their vehicle will break down or what will cause a break down? i told the representative that i felt the claims advertised by the company were misleading...i ended the call but am still receiving letters from car shield.
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