The Omaha World-Herald recently featured an article that discussed a study conducted by the Better Business Bureau (BBB) that analyzed the auto warranty industry in the United States after receiving a large number of complaints regarding vehicle service contracts. According to the study, 92 percent of the 660 people surveyed reported they found the tactics used by those selling warranties misleading or otherwise improper.
Many consumers reported paying for a warranty contract and then having their claim refused for items they believed the warranty would cover. The study found that misled consumers ended up spending an average of $1,480 on “uncovered” repairs.
The study found that the industry’s multi-tiered nature confuses many consumers, as there are warranty sellers, providers, insurers, administrators, and financing entities. Sixty-four percent of those surveyed reported they did not know the name of the company that was responsible for paying their claims. For example, one complaint filed by a consumer in Alabama described a seller in Missouri, the provider in North Carolina, administrator in Texas, contract insured in South Carolina, and finance company in Illinois.
A good auto warranty can provide consumers with excellent benefits, and not all companies engage in unfair or deceptive business practices. If you are considering purchasing a vehicle service contract, the BBB recommends consumers follow these tips to avoid being taken advantage of:
- Carefully read the contract before buying, and understand fully what is and is not covered.
- Check the companies involved with the BBB.
- Check whether the cost of the contract exceeds the value of the vehicle
- Find out from the seller the names and locations for the administrators, providers, and insurers, and exactly how claims are processed.
- If your phone number is on the national “do not call” list, yet you receive solicitations, report these violations to the Federal Trade Commission (FTC) or Attorney General.
Howard D. Silver has been protecting consumers in California from lemon vehicles, fraud, and other forms of unfair business practices related to cars since 1987. To learn how Mr. Silver can help restore your legal rights, call 1-(855) 341-2611.