Magic Auto Additive Makes Your Service Contract Refund Disappear
Auto service companies in St. Louis have found a way to avoid issuing refunds when customers cancel vehicle-protection contracts: by selling warranted vehicle additives in place of service contracts.
The new deals resemble service contracts - indeed, many consumers don't seem to notice the difference. But unlike service contracts, the additive offers don't allow customers to cancel and get a refund.
According to a report in the St. Louis Post-Dispatch, companies such as US Fidelis and National Dealers Warranty are using the additive plans to avoid state laws requiring that refunds be issued to vehicle-service consumers for coverage they don't use.
Here's how the product warranties work: Consumers are sold an automotive additive - a bottle of liquid, or some tablets. Companies selling the additive say that if the product fails to prevent a breakdown, the warranty on the additive will cover repair bills - or at least some portion of them.
With traditional auto service contracts, the consumer is purchasing a promise that the seller will cover repair bills. The difference? First, with the additive, the consumer is buying a product, not a contract. Second, the consumer is entitled to a refund if a service contract is canceled early. That's not the case with a product warranty.
So if you buy one of the additive warranties from one of the vendors and need to cancel for whatever reason (move out of state? find a better mechanic?), you're out roughly $2,000.
Ten St. Louis area companies are named in a Better Business Bureau complaint about the matter, and many of them do business across the country, "including US Fidelis; National Dealers Warranty; Dealers Warranty, of St. Charles, which does business as Mogi; Carhill Enterprises, of St. Louis, which does business as Consumer Protection Services; and TXEN Partners, of St. Louis, which does business as Protection Direct."
Regardless of what state you live in, consumers should read the fine print before buying any new vehicle-service product.
Would you pay $2,000 for this additive? [St. Louis Post-Dispatch]
(Photo: Consumerist)
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What exactly does US Fidelis and the rest of these people do? The ads swear that you pay a small monthly fee and then never pay any repair bills ever again. Now, from stories here and common sense, we all know this is bs.
So, how do they stay in business, and do they cover anything? Or is it just a black hole you pay into, then make a claim, and get it denied, kind of like having United Health for medical insurance?
Reminds me of a story from back in the UK where only certain types of goods were allowed to be sold on Sundays, food was OK, hardware was not. This resulted in DIY stores selling very expensive fruit on Sundays with "free" ladders and tools.
This is why laws end up being so complicated: you make them simple and some douche will find a loophole that goes against the intent but not the letter.
@masonreloaded: There's a similar trick to getting around ticket-scalping laws. Scalpers will sell "memorabilia," with a free gift of a ticket(s) with purchase. One $200 hat later, and you've got a pair of $50 face-value tickets.
@masonreloaded: In Texas we have laws about serving alcohol before noon on Sundays. You can serve it, but it must be served with food. Some enterprising restaurants get around this by serving you booze, then placing a small plate of rock-hard, inedible cheap biscuits on the table so it looks like you've ordered food too. The biscuits never get eaten, and in fact are re-used as patrons come in. It's understood that they've "been around" all morning and you don't touch them.
The PD did some decent investigative journalism? Unheard of!
Well, this is obviously is a transparent attempt to get around warranty law, but I am forced to admire their chutzpah. You have to admit this is a pretty clever trick.
However, I kind of think that a determined AG or insurance commissioner could convincingly argue in court that these "additives" still walk, talk, and quack like service contracts... it'd be a close call.
@masonreloaded: These "Blue Laws" usually only require that you close 1 day per week, generally everyone picks Sunday. Two Target stores in one city just switched. One was open Saturday, the other open Sunday. You just had to remember which Target to go to, but you could always get what you want.
This could backfire. If they sounds like they are making the claim that it will prevent breakdowns, and can't substantiate that, it's fraud. I mean, it's still fraud, just fraud dressed up a little different.
Liquids and pills for my car? Will it get bigger and last longer? Does Bob use Enginzyte with his 1950 Plymouth Woodie?
Is there a reputable auto warranty company around? I've heard nothing but horror stories. My factory warranty just expired, and I'd buy an extended warranty to cover me until the end of my loan period (2 more years) if I knew I was dealing with a reputable company.
Just another reason not to buy an extended warranty on your auto ever. Studies have proven time and time again that they are generally a waste of money (and were they actually profitable to the consumer, the companies offering them would be out of business!).
@tbax929:
"My factory warranty just expired, and I'd buy an extended warranty to cover me until the end of my loan period (2 more years) if I knew I was dealing with a reputable company."
Whoa ! Whoa ! Whoa! Hold the phone !
For what most of these warranties cost ,(anywhere from $1800 -$3500) you could put the money in the bank , "self insure" and come out ahead by miles. The "warranty coverage" that these companies provide after all of the "claim denied" and "policy exemption" loopholes is about 15 cents on the dollar. Better to have the whole dollar in the bank ,perform required maintenance scrupulously and replace the car on a regular basis than buy anything from these crooks.
Another tip- Buy a dependable car. Sure , the lovelies in tube tops may not lick their lips provocatively when you drive by in a Civic ,but you'll get where you are going without the likes of US Fidelis and National Auto Warranty taking a great big 'ol juicy bite outta yo' ass to the tune of 3 or 4 K . Do some research and find a well built car and you may never have a warranty claim at all...
When I bought my 04 Civic Hybrid, I elected for an extended warranty because 1) I figured if anything broke on it, it would be expensive, and 2) it did have a buy-back provision. Luckily my car never did break down, so when the warranty ran out by mileage, I got my money back--but it took two months, multiple faxings of documents, and personal intervention from someone in authority at the dealership to get it done.
It seemed like every time I faxed something in, they wanted me to fax in yet something else, so I took to carrying all the documents I could get my hands on back and forth to work, so I could fax it in right away when they asked for it. It was a complete pain in the arse, but I got my money, at least.
@sicknick: Black hole, breakage, plus "fear the asterisk*" all rolled up into one overly expensive bill...
"Larry Hecker heads the Vehicle Protection Association, a trade group for companies that sell auto-service contracts.
"We haven't addressed (product warranties) yet, but I'm sure we will down the road," he said, adding that it will probably be discussed by industry leaders when they meet for an annual conference next month in Orlando, Fla."
This is one association that absolutely needs Tom Mabe to crank call them while at their convention...
Here is the convention info for those interested in attending:
Annual Meeting: September 21-22, 2009 in Orlando, FL
The annual meeting of the Vehicle Protection Association (formerly Automotive Warranty & Service Contract Association) will be held on Tuesday, September 22, 2009, with an optional portion of the conference held on Monday, September 21 at the:
Orlando World Center Marriott Resort & Convention Center
8701 World Center Drive
Orlando, FL 32821.
Phone: 1-407-239- 4200.
To register for lodging, call (800) 380-7931 and mention the VSCAC Conference.
Attendees will have the opportunity to learn about the latest activities of the FTC, the Multi-State Attorney's General investigation, recent media attention, highlights of the VPA Public Affairs and Industry Enhancement Campaign, and much more.
*****************************************************
Seems like they might have even changed their name because of bad publicity:
"Vehicle Protection Association (formerly Automotive Warranty & Service Contract Association)"
@econobiker: I'd love to see what they're doing at this convention
Room 11-A : The FTC - Fines are just the cost of doing business
Room 13-C : Workshop on contract obfuscation
Room 12-A : Panel discussion on how to deal with the media
Room 16-V : How to effectively spend your new found wealth stolen from stupid people
Thats a little naughty isn't it?
@SacraBos: Actually in Texas, it's literally Sunday in the liquor laws. Stores selling spirits must be closed on Sunday and retail stores selling beer and wine cannot sell them until noon on Sunday. Also, retail stores that are open 24 hours must stop beer sales at midnight each night (don't remember when sales can start back up) and bars must close at 2AM. In fact, you can't consume alcohol in a bar or restaurant after 2AM. You could have a half pitcher of beer and you can't take it with you, or wait until finished. Then there's also the wet/dry laws in Texas. Some precincts can be dry where no alcohol sales are allowed by the local authority, however a bar can just then register as a private club which is only governed by the state.
In contrast, I think Missouri's only law on liquor is you must be 21 to purchase. I can walk into Wal-Mart at 8AM on Sunday and pick up any kind of alcohol including hard liquor. Not only that, but Missouri liquor tax is less than Texas.
@zacox: With my prior car, a Chrysler minivan, I bought an extended warranty direct from Chrysler. No third parties involved. I thought it was a decent buy even though I only had one minor problem in 150,000 miles which they promptly fixed at a dealership.
Is this the same additive that gives me 100 miles to the gallon and makes women rush to touch my car?
@econobiker: ... Go out of business before customers have a chance to file a claim, then go into the Auto Warranty scam business under a different name.
With a name like Consumer Protection Services, how can one go wrong?
F U CONSUMER PROTECTION SERVICES, you fuckin' wankers.
That's really all I have to say. I get (was getting) calls from them nonstop.
@MrEvil: Traditionally the blue laws have been for Sundays, but some states caught on (or maybe were sued) that this could be seen as a religious intrusion into a civil matter. So they switched to letting places pick a day.
Regarding the GP (SacraBos) I'm surprised any retailer would _choose_ to close on a weekend if they were given the choice of any day of the week. I suspect the choices are limited to Saturday and Sunday.
@SacraBos: I like that. If the product doesn't work as claimed, they could have to give a full refund and pay fines. This may not have been the smartest move they could make.
Here's hoping there isn't a mandatory binding arbitration clause in the contract.
@Snarkysnake:
I have a dependable car, I've just never had a car that didn't have a warranty.
But your suggestion about self-insuring is probably the way to go. Thanks.
Hmmm...I love these "fine print" companies. At what point in business school do they say "as long as it's in the contract it's ethical...even if they can't read it or understand it".
At this point, I'd tell people to just stop caring because the US economy was created by screwing the clods (note: gods vs. clods) and you're a clod if you're a consumer. Go to court, spend thousands (or hundreds of thousands) of dollars and they'll just keep peppering you with motions so that you never get to trial. After all...it's the American way.
@masonreloaded: I prefer to think the "douche" is the government that decided it needed to regulate when ladders could be sold.
You can have my ladder when you can pry it out of my cold, damp basement.
@sicknick: I think you answered your question when you likened the warranty scams to health insurance. It's pretty much the same business model. Well, to be more exact, it's similar to the business model followed by the smaller cut-rate health insurance companies (like MEGA, and their ilk.)
I have to wonder how soon you'll start seeing signs popping-up in repair shops stating that they do not accept US Fidelis warranties?
Interesting trick; when they can't get people to (over)pay for their service, they change businesses and start selling a product.
I wonder what the FTC will think of this?