WASHINGTON—NRRM, LLC, which does business as CarShield, along with American Auto Shield, LLC (AAS), the administrator of its vehicle service contracts (VSCs), will pay $10 million to settle Federal Trade Commission charges that its advertisements and telemarketing for VSC are deceptive and misleading.
According to the FTC, many purchasers found that many repairs were not “covered,” despite having made payments of up to $120 per month.
The FTC is also alleging CarShield’s celebrity and consumer endorsers made false statements in its ads.
The stipulated order settling the Commission’s complaint also bars CarShield and AAS from making deceptive and misleading statements in the future and requires them to ensure their endorsers’ testimonials are truthful, accurate, and not deceptive, the FTC said.
NRRM is a Missouri-based company that advertises VSCs to consumers throughout the United Sates. AAS, based in Lakewood, Colo., designs and administers the VSCs.
Celebrity Endorsers
According to the FTC’s complaint, CarShield advertises and sells VSCs costing approximately $80 to $120 a month. CarShield’s ads for VSCs often feature celebrities such as sports commentator Chris Berman and actor Ice-T.
“These endorsers try to assure consumers that buying a CarShield service plan will provide them with ‘peace of mind’ and ‘protection’ from the cost and inconvenience of vehicle breakdowns, which will inevitably occur,” the FTC said.
The complaint alleges many ads claim that all repairs or repairs to “covered” systems, such as the engine and transmission, will be covered and use language that makes consumers believe CarShield will pay for all necessary repairs.
Not the ‘Best Line of Defense’
“For example, one ad that ran 18,000 times on television stated, ‘With CarShield’s administrators, they make sure you don’t get stuck with expensive car repair bills like this.’ It also touts CarShield VSCs as ‘your best line of defense against expensive breakdowns,’” the FTC said.
The FTC said the company sells its plans using telemarketers who answer inbound calls and make outbound calls responding to consumers, including those who made web inquiries. Using scripted statements written by CarShield and cleared by AAS, the telemarketers pitch the VSCs and tell consumers that, whether they use a dealer or local mechanic for the repair work, “there is just a $100 deductible for any covered repair,” the FTC explained.
‘Deceptive Representations’
“However, consumers do not always get what they think they bought when signing up for the VSCs. Instead, the complaint alleges that CarShield’s ads deceptively represent that: all repairs or repairs to ‘covered’ vehicle systems will be paid for under the plans; consumers will receive a rental car at no cost when their car breaks down; and consumers can use the repair facility of their choice for repairs,” the FTC said.