CarShield Ordered to Pay $10M For Deceptive Practices, Fake Ads

If you signed up with Car Shield for auto repair protection, you may be getting your money back.

CarShield, along with American Auto Shield, LLC (AAS), the administrator of its vehicle service contracts has agreed to pay $10 million to settle Federal Trade Commission charges that its advertisements and telemarketing for car repair contracts are deceptive and misleading and that many purchasers found that many repairs were not “covered,” despite making payments of up to $120 per month.

The FTC also alleges CarShield’s celebrity and consumer endorsers made false statements in its ads.

The stipulated order settling the Commission’s complaint bars CarShield and AAS from making deceptive and misleading statements in the future and requires them to ensure their endorsers’ testimonials are truthful, accurate, and not deceptive.

“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.”

According to the FTC’s complaint, CarShield advertises and sells VSCs costing approximately $80 to $120 monthly.

CarShield’s ads for VSCs often feature celebrities such as sports commentator Chris Berman and actor Ice-T.

These endorsers try to assure consumers that buying a CarShield service plan will provide them with “peace of mind” and “protection” from the cost and inconvenience of vehicle breakdowns, which will inevitably occur.

The complaint alleges many ads claim that all repairs or repairs to “covered” systems, such as the engine and transmission, will be covered and use language that makes consumers believe CarShield will pay for all necessary repairs. For example, one ad that ran 18,000 times on television stated, “With CarShield’s administrators, they make sure you don’t get stuck with expensive car repair bills like this.” It also touts CarShield VSCs as “your best line of defense against expensive breakdowns.”

However, the FTC said those ads were misleading as the endorsers were paid actors who never actually used CarShield.

The company sells its plans using telemarketers who answer inbound calls and make outbound calls responding to consumers, including those who made web inquiries. Using scripted statements written by CarShield and cleared by AAS, the telemarketers pitch the VSCs and tell consumers that, whether they use a dealer or local mechanic for the repair work, “there is just a $100 deductible for any covered repair.”

The complaint further alleges that CarShield’s ads deceptively represented that: 1) all repairs or repairs to “covered” vehicle systems would be paid for under the plans; 2) consumers will receive a rental car at no cost when their car breaks down; and 3) consumers can use the repair facility of their choice for repairs.

Specifically, many consumers could not use the repair facility of their choice, as many do not accept CarShield service contracts. And many consumers found that repairs they thought were covered were not.

In fact, none of CarShield’s vehicle service contracts cover all repairs or even repairs to “covered” vehicle systems. Instead, the plans contain a myriad of exclusions.

Consumers with denied claims receive no rental car, while many consumers with “approved” claims must pay a portion of their rental car costs.

The order also imposes standard reporting and compliance provision that will remain in place for up to 10 years.

Finally, the order imposes a $10 million monetary judgment against CarShield and AAS, which will be used to provide refunds to defrauded consumers.