U.S. Fidelis and Credexx sued by states over auto policy tactics
Nine states -- Pennsylvania, Washington, Iowa, Idaho, Kansas, North Carolina, Ohio, Texas and Wisconsin -- are suing the now-bankrupt U.S. Fidelis for deceiving consumers into spending thousands of dollars on service contracts that many times didn't cover repairs. In a separate but related case, Washington, Idaho, Kansas, Ohio and North Carolina are also suing California's Credexx Corp., making similar allegations. The lawsuits are the latest legal dances in the extended auto warranty business. Consumer Ally has been keeping tabs on other cases as well.
Washington Attorney General Rob McKenna said that more than 400,000 consumers bought warranties from U.S. Fidelis through its marketing practices.
"If you own a car, there's a good chance you've received a phone call or official-looking postcard claiming that your auto warranty has expired or will soon," McKenna said in a statement. "The marketing companies behind these pitches have tricked hundreds of thousands of consumers nationwide into buying expensive service contracts that often don't cover promised repairs."
U.S. Fidelis also did business as National Auto Warranty Services Inc. as well as Dealer Services. Pennsylvania Attorney General Tom Corbett said in a statement that the company would use "high-pressure sales pitches" to get consumers to pay up to $4,000 for service contracts. Investigations estimated the company made one billion unwanted sales calls nationwide.
Pennsylvania's suit claims that U.S. Fidelis told consumers the coverage would be the same as original manufacturers' warranties and implied that the contracts were associated with manufacturers or dealerships. U.S. Fidelis also failed to honor "100% money back guarantee" offers and made repeated calls to consumers on the state's "Do Not Call" list. Pennsylvania's lawsuit seeks fines and full restitution for consumers who had losses from deceptive business practices.
Also named in the lawsuits were company President Darain E. Atkinson of Lake Saint Louis, Mo., and firm Vice President Cory C. Atkinson, of Wentzville, Mo. -- brothers and U.S. Fidelis co-owners. Washington's attorney general said as many as 40 states have been investigating U.S. Fidelis.
In the Credexx case, states including Ohio, Washington and Kansas allege the company used aggressive telemarketing techniques to pitch its products. Credexx also did business as Auto One Warranty Specialists, said Ohio Attorney General Richard Cordray.
Cordray's office also sued a Cleveland company, Auto Repair Warranty Inc., for allegedly misrepresenting its products.
The Federal Trade Commission warns consumers to be wary of any notice that claims a warranty is about to expire. Often the notices will say "motor vehicle notification" or "final warranty notice", which is a tactic to create urgency and get consumers to buy. Even though a sales pitch may say extended warranty, what is really being sold is a service contract. The difference is a warranty comes with a new car and is included in the price; a service contract can be bought at any time and always is a separate cost.