CarShield, a prominent seller of vehicle service contracts (VSCs), and its administrator American Auto Shield LLC (AAS) will pay $10 million to resolve charges by the Federal Trade Commission that their advertisements and telemarketing practices were deceptive and misleading. According to the FTC, many consumers found that repairs were not “covered” despite paying up to $120 per month.
The FTC’s complaint also alleges that CarShield’s celebrity and consumer endorsers made false statements in advertisements. The settlement bars Missouri-based CarShield and AAS from future deceptive and misleading statements and mandates that their endorsers’ testimonials be truthful and accurate.
“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, cirector 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 LLC, doing business as CarShield, is a Missouri-based company that promotes VSCs across the United States. AAS, based in Lakewood, administers these contracts. The FTC complaint claims CarShield’s ads, featuring celebrities such as sports commentator Chris Berman and actor Ice-T, assured consumers that buying a CarShield service plan would protect them from expensive repairs.
However, the FTC alleges that CarShield’s advertisements falsely represented that all repairs or repairs to “covered” vehicle systems would be paid for, that consumers would receive a rental car at no cost, and that they could use their preferred repair facility. In reality, many repairs were not covered, and consumers often could not use their chosen repair facilities. Additionally, consumers with denied claims received no rental car, while those with approved claims had to pay part of the rental costs.
The FTC also found that CarShield’s celebrity endorsers were not actual customers and had not saved money using AAS VSCs, contrary to what the ads suggested. Consumer endorsers claiming specific savings from the plans were also found to be deceptive.
The settlement order requires CarShield to cease these misrepresentations and comply with the FTC’s Telemarketing Sales Rule. It also mandates that CarShield and AAS monitor and review advertisements by third-party marketers. The order includes compliance provisions that will remain for up to ten years and enforces a $10 million monetary judgment to refund defrauded consumers. The judgment must be paid within seven days of the court’s approval.
The FTC’s complaint and proposed order were filed in the U.S. District Court for the Eastern District of Missouri, with the Missouri Attorney General’s Office providing assistance. The Commission vote to authorize the complaint and order was unanimous.