ImageNRRM, LLC, operating as CarShield, along with American Auto Shield, LLC (AAS), the administrator of its vehicle service contracts (VSCs), will pay $10 million to settle Federal Trade Commission charges. The FTC alleges that CarShield's advertisements and telemarketing for VSCs were deceptive and misleading, leading many purchasers to find that numerous repairs were not "covered" despite making payments of up to $120 per month. Additionally, the FTC claims 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. It also 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.”
NRRM is a Missouri-based company that advertises VSCs across the United States. AAS, based in Lakewood, Colorado, designs and administers these VSCs.
According to the FTC’s complaint, CarShield advertises and sells VSCs costing approximately $80 to $120 a month. The ads often feature celebrities such as sports commentator Chris Berman and actor Ice-T who assure consumers that buying a CarShield service plan will provide them with “peace of mind” and “protection” from vehicle breakdown costs.
The complaint alleges that many ads claim all repairs or repairs to "covered" systems like engines and transmissions will be covered. For example, one ad stated: “With CarShield’s administrators, they make sure you don’t get stuck with expensive car repair bills like this.” It also promotes CarShield VSCs as “your best line of defense against expensive breakdowns.”
CarShield sells its plans through telemarketers who answer inbound calls and make outbound calls responding to consumer inquiries. Using scripted statements written by CarShield and cleared by AAS, telemarketers pitch the VSCs stating there is just a $100 deductible for any covered repair.
However, consumers do not always receive what they expect when signing up for these VSCs. The complaint alleges that CarShield’s ads deceptively represent that all repairs or repairs to "covered" vehicle systems will be paid under the plans; consumers will receive a rental car at no cost when their car breaks down; and consumers can use their preferred repair facility.
Specifically, many consumers could not use their chosen repair facility as it did not accept the VSCs. Many found that repairs they thought were covered were not due to myriad exclusions in the plans. Consumers with denied claims received no rental car while those with approved claims had to pay part of their rental car costs.
Furthermore, while celebrity endorsers claimed they had signed up for and used CarShield's VSCs saving money in doing so; this was often untrue as they were not real customers nor had saved money using an AAS VSC. Similarly deceptive were consumer endorsers claiming specific savings which they had not actually achieved.
The proposed order addresses alleged violations of the FTC Act by prohibiting misrepresentations described in the complaint along with any other related misrepresentations regarding goods or services. It also prohibits failing required disclosures or violating the FTC’s Telemarketing Sales Rule.
Additionally barred are misrepresentations about any endorser's ownership/use/experience with products/services while requiring AAS inform third-party marketers about this order reviewing/monitoring advertising/marketing practices henceforth imposing standard reporting/compliance provisions lasting up-to 10 years further imposing $10 million monetary judgment against both companies aimed at refunding defrauded consumers payable within seven days post-court approval entering final order settlement filed U.S District Court Eastern District Missouri brought agency East Central Region thanking Missouri Attorney General Office aiding case handling staff attorneys Matthew Scheff Adrienne Jenkins Sammi Nachtigal noting commission files complaints upon having reason believing defendants violate law public interest stipulating final injunction/orders force law district court judge approval signature promoting competition protecting educating never demanding money threats transfers promising prizes learning more topics reporting fraud scams bad business practices following social media reading alerts blogs latest news updates
