Because of the large number of complaints that had been filed, The BBB in St. Louis undertook a study of the industry. 660 complainants were surveyed across the country; it revealed that 92% of respondents felt that the company's selling tactics were misleading or otherwise improper. Dollars lost by consumers topped 5 million with the average per consumer being $1,430. Additionally, there was over 2.7 million dollars in un-reimbursed charges for repair bills.
Last week, the principals of US Fidelis, formerly the largest retailer of vehicle service contracts, were indicted on 27 criminal counts centering on deception and fraud in the marketing of the contracts according to the Better Business Bureau Serving Eastern Missouri & Southern Illinois.
In some cases, consumers are under the impression they are getting a warranty sanctioned by the auto manufacturer, but in reality most do not receive what they believe is being purchased. In Chicago and Northern Illinois more than 100 consumers have been on the loosing end of these contracts.
"A key issue among complainants is confusion," says Steve J. Bernas, president & CEO of the Better Business Bureau serving Chicago and northern Illinois. "This is a multi-tiered industry with sellers, providers, administrators, insurers and financing entities involved which in many cases makes it very difficult for consumers to even know the name of the provider of the contract, and who is responsible for paying claims."
Shannon Gordon from Steger, IL states, "I signed up when I heard a commercial and knew my car was getting older. I paid $125 to sign up and then paid monthly after that. When my car broke down they made excuses and made it difficult. They turned me down so I was around $1000 in the hole from paying them and could not pay the repair bill to get my car out of the shop. They ignored my complaint. Then I filed it with the Better Business Bureau and they refunded around 95% of my money. Then I paid the bill and got my car back."
The Better Business Bureau suggests the following before buying these types of warranties:
Read the contract carefully. Know what is covered and not covered and under what conditions. If the seller won't provide a contract, don't buy it.
Do the arithmetic. The cost of a contract can be more than the car's value.
Ask Questions. Ask the seller the names and locations of the providers, administrators and insurers. Ask how claims are processed.
Do not be pressured into making an immediate decision. Beware of sales offers that require you to buy immediately in order to qualify for the best rate.
Beware of any claims that you will receive "total" or "bumper to bumper" coverage on your vehicle. This does not necessarily mean that every problem with your car will be covered.
Read Carefully. Inspect your manufacturer's warranty and contact your dealer or manufacturer to make sure you are not purchasing duplicate coverage.
Check all companies involved. This can be done through your BBB at www.bbb.org