ST. PETERS — CarShield has agreed to pay an eight-figure federal settlement, as announced by the Federal Trade Commission on Wednesday, in order to resolve allegations of deceiving customers about its products.
CarShield, in conjunction with Colorado-based American Auto Shield, which administers its contracts, will pay $10 million to settle the charges, with the funds being utilized to provide refunds to customers who were misled.
The complaint filed by the FTC outlines deceptive and aggressive telemarketing practices, limited coverage and options for consumers, and endorsements from celebrities who had not actually used CarShield’s products.
“For many consumers, their personal vehicle is one of the most valuable assets and an essential means of transportation for work, school, and healthcare,” stated Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “Instead of delivering the peace of mind promised in its advertisements, CarShield left many consumers facing financial troubles.”
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As per the FTC complaint, CarShield’s telemarketers failed to disclose the systems and parts not covered by their contracts, and that even covered parts could be denied based on the cause of failure. Customers only received a 25- to 30-page contract with exclusions after purchase, which were not disclosed in advertisements or by telemarketers.
If customers declined to purchase a contract, telemarketers would make up to seven follow-up calls to close the sale. In cases where customers tried to cancel their contracts, the “retention” department would try to persuade them to stay by offering discounts.
CarShield established a website, CarShieldFTC.com, where they posted statements about the settlement. The site mentions the company’s disagreement with the FTC’s claims, as well as the inclusion of more detailed information in their marketing materials regarding covered repair elements.
In a statement, CarShield’s General Counsel Michael Carter attributed the company’s challenges to the impact of COVID-19.
CarShield predominantly offers month-to-month plans costing between $80 and $120, which renew automatically. Despite regular payments, buyers often found themselves not covered for numerous repairs on their vehicles and faced restrictions while choosing repair facilities due to requirements imposed by American Auto Shield.
The FTC highlighted that CarShield trained employees to feign surprise when consumers mentioned limitations on repair sites as a reason for canceling their contracts.
One consumer cited in the complaint stated, “Everyone laughs when I ask if they accept CarShield as coverage.”
The complaint also mentioned instances where CarShield’s celebrity endorsers were not genuine customers, or if they were, they were treated as “preferred customers” receiving special benefits not available to regular consumers.
