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January
14, 2010
Vehicle
Protection Association:
Although it would have been better to prevent the "expiring
warranty" scam from trashing the reputation of the vehicle
service contract industry, efforts are now under way to repair the
damage by making direct marketers adhere to a code of conduct. In
the UK, however, the code preceded the need, so there was no problem,
at least in the vehicle service contract industry.
Soon,
it will be safe for all of us to once again tell the people we meet
at parties and weddings what we do for a living. "I work in
the warranty business," we will say, and what they will not
say in response is "Oh yeah, one of your buddies called my
cell phone yesterday and told me that my car's warranty was expiring."
That's
because the scourge of "expiring warranty" scams is showing
signs of winding down, thanks not only to the de jure solutions
now being pursued in the courts by 50 angry attorneys general and
the reawakened Federal Trade Commission, but also the de facto solutions
the market itself is imposing on those who dared to abuse their
customers.
One
the one hand, thanks to the increased enforcement of "do-not-call"
rules, the companies that called every phone number they could find
are now curtailing those activities, letting some of their less
occupied sales staff go, and finding other ways to sell their vehicle
service contracts. On the other hand, the industry itself is making
great progress in the realm of industry self-regulation, thanks
to the efforts of trade groups such as the Vehicle Protection Association.
Industry
Self-Regulation
Helen MacMurray, a partner in the law firm of MacMurray, Petersen
& Shuster LLP and the legal counsel of the Vehicle Protection
Association, said the trade group's members are now beginning to
implement the Standards of Conduct that she finished editing last
October. Once they do, her law firm will begin conducting audits,
and the VPA's board will begin certifying those members as compliant.
Back
in an August 14, 2008 Warranty Week article, MacMurray said that
the direct marketers of vehicle service contracts -- those who sent
out postcards and emails, advertised on television and radio, or
called consumers directly -- would have to self-regulate or they'd
be run out of business by the consumer protection agencies and attorneys
general that were logging an incredible number of complaints from
their constituents even then.
So
here we are in early 2010, and some listened but most did not. And
the consumer protection agencies and attorneys general did exactly
what MacMurray predicted they would do. "It's run a lot of
people out of business," she said of the groundswell of negative
publicity and the prosecutions it caused.
Seventeen
months ago, there were perhaps 100 to 120 direct marketing companies
in the business, many of them auto-dialing or mass-mailing their
"expiring warranty" messages at will, until the regulators
simply had enough. Many were litigated out of business, or had to
shutter when the do-not-call and telemarketing rules became much
more restrictive.
Survival
of the Fittest
Today there are perhaps only 40 companies left in the direct marketing
industry, though that thinning of the herd may have a hidden benefit.
Simply put, the worst fell first, and fell hardest. Those who called
the Senator's mobile phone or rang the 911 operators were the first
to be served with the court injunctions. The remaining survivors,
having seen what happens to the bad guys, are now much more likely
to do the right thing.
Meanwhile,
MacMurray hasn't given up on industry self-regulation. In fact,
she said she thinks the chances of the remaining industry players
putting in place an effective plan for self-regulation have actually
increased.
"Since
we last talked, we are now at a level of buy-in of who's left in
the industry to truly make it succeed, and to succeed by wholly
complying with the law in a manner where you are constantly checked,
and probed, and mystery shopped," MacMurray said. Evolution
has done its job: the fittest have survived.
That's
not to say that there aren't still guys operating illegal auto-dialing
operations out of their spare bedrooms in Miami and Las Vegas, concealing
both their identities and locations, and evading both the regulators
and the process servers. But their activities have dropped off considerably,
down perhaps to the level of the "Bill Gates selected your
email address to win the Microsoft sweepstakes" or the "I
am a dead Nigerian millionaire with no family" scams.
Because
of all the uproar over the auto-dialers and their "expiring
warranty" scam, however, the VPA's Standards of Conduct have
now effectively banned the use of pre-recorded marketing messages
by its members. Calls by live persons are still permitted by the
VPA's rules, but federal telemarketing sales rules have meanwhile
become much stricter. So that sales channel has lost its luster.
Besides, the primary appeal of the auto-dialers was their low operating
cost, and that advantage disappears as soon as live attendants become
involved.
Not
Extended Warranties?
Version 2.0 of the Standards of Conduct document was published in
October 2009. And it bans not only pre-recorded solicitations, but
also Caller ID spoofing (concealing the true source of the calls),
false linkages of the sales pitch to the vehicle manufacturer or
dealer, and even the use of the terms "warranty" or "extended
warranty" to describe the service contracts for sale.
To
be specific, the standards state that "Members shall not use
in their company name, advertisements, sales solicitations or any
other description of their products, words such as "warranty,"
"dealer," "dealership," "manufacturer"
(including actual manufacturer's name; e.g. "Ford") or
any other words that falsely imply that the company is somehow associated
with the manufacturer of the motor vehicle."
MacMurray
said that was done to prevent consumers from confusing the vehicle
manufacturer's warranty with the services being offered by these
unrelated third parties. "The majority of what's sold by our
members are service contracts," she said. Granted, the term
"extended warranty" may also have been an accurate description
of the services being offered, but it was being combined with company
names and department names in such a way as to become deceptive.
So the VPA's members decided to ban the use of the word "warranty"
in either the company name or the product name.
Members
also agreed to ban the use of words such as "insurance,"
"surety," or "mutual" in their marketing materials,
and also cannot choose company names that are deceptively similar
to the names of any existing insurance companies. The goal is to
avoid making any statements that could be misleading or confusing,
and to avoid implying any nonexistent affiliation with a manufacturer,
dealer, or auto insurance company.
Elsewhere,
the standards ban the use of marketing terms such as "exclusive,"
"limited time," or "preselected," unless the
offers really are time-limited or are made to only a selected few.
The rules also ban implying that the service contracts on offer
are in any way linked to product recalls. If a vehicle identification
number is included, only the first 12 digits can be mentioned.
If
a VPA member should choose to use any service providers located
outside the United States, those service providers must adhere to
the VPA's standards as well as all applicable U.S. laws. And before
they accept a call transferred from any outside service provider,
they "must conduct due diligence to ensure that the transfers
were obtained legally." In a very comprehensive manner, the
document forbids most of the practices that got the industry into
trouble, and closes most of the loopholes that could have been used
to allow those practices to continue.
Going
Into Training Mode
Besides the rules outlined in the Standards of Conduct, there is
also now an annual audit process in place, under which an attorney
from the MacMurray, Petersen & Shuster law firm will visit the
business and conduct an on-site inspection. In these early days,
MacMurray said, most of those audits quickly turn into compliance
tutorials, as the attorney finds violations and instructs the member
company how to correct them.
"The
auditor helps them set up policies and procedures, and helps them
review their calls -- everything they need to be able to comply
with the standards," MacMurray said. "While the auditor
is there, she listens to calls, and she listens to tapes of calls.
(We now require all calls be taped.) And once they've met all the
standards to her satisfaction, she recommends to the [VPA] board
that they be certified."
The
list of VPA board members now includes: Rebecca Howard of PayLink
Payment Plans LLC (formerly Warranty Finance LLC); Scott McMillan
of Mepco Finance Corp.; Carter Patterson of Forté Data Systems
Inc.; Marci Johnson of Summit Finance LLC; Matthew Weil of American
Guardian Warranty Services Inc.; Paul Sporn of Royal Administration
Services Inc.; and Paul Chernawsky of Endurance Warranty Services.
Mystery
Shoppers
But just to be sure each member actually deserves to be certified,
MacMurray then has her staff actually call or email the company
in question, posing as prospective customers, just to see if they
really are following all the VPA's rules. Ironically, in the middle
of our interview, one of those companies seeking certification called
her back -- not knowing who she was -- asking her if she was shopping
for a service contract. By the way, her law firm is located in New
Albany, Ohio, so anyone handling a customer in the (614) area code
had better be on their best behavior.
MacMurray
said she told the salesman to go ahead with the purchase and to
process a deposit for her, but she told us that she would later
call him back and cancel it. That, by the way, will validate that
all the VPA's rules for cancellations and refunds are being followed,
as outlined on page 15 of the Standards of Conduct. Buyers have
30 days to cancel, and the seller has 30 days to make the refund
(but only five days to return the deposit if it was made by credit
card).
If
the seller doesn't meet those standards, their certification could
be revoked. And if they lose their certification, they may also
lose their ability to finance the service contracts they're selling.
MacMurray said the three market-leading finance companies that each
have an officer on the VPA board -- PayLink Payment Plans LLC (formerly
Warranty Finance LLC), Mepco Finance Corp., and Summit Finance Inc.
-- have each decided not to do business with those who lack or lose
certification by the middle of 2010.
"With
the perilous situation with the regulators," MacMurray said,
"only if we can be assured that the members are doing what
we say they're doing will everybody be able to escape this constant
litigation that they've been under for the last couple of years."
MacMurray
said the wider goal is to help the regulators sort out which companies
are doing the right thing and which need their continuing attention.
In fact, she said, once most of the VPA members have been certified,
they may begin to help the attorneys general and the Federal Trade
Commission hunt down those companies that chose to remain outside
the law. Only then can the reputation of the industry be repaired
and restored.
According
to the preamble of the Standards of Conduct, dishonest, misleading
or offensive communications will discredit all members of this industry.
Because of this guilt by association factor, all companies with
a stake in the industry should encourage others to follow these
standards as well.
back
to top
December 29, 2009
After
more layoffs, US Fidelis stops selling service contracts
By:
Matthew
Hathaway, St. Louis Post-Dispatch
Wentzville-based
US Fidelis once claimed to be the nation’s leading seller
of extended auto-service contracts. Today, the company announced
it has stopped selling the so-called extended warranties.
The
end of sales comes on the heels of at least three mass layoffs in
recent weeks that have shrunk the company from about 1,100 employees
earlier this year to “more than 200,” according to a
company statement. Those workers include customer-service and account-resolution
agents who work with existing customers, which the company has said
number more than 300,000.
The
company has blamed its dramatic collapse on the economy and what
it considers to be unfair criticisms from consumer groups and the
news media.
“As
a result, hundreds of good, hard working people have lost their
jobs and the St. Louis area has lost hundreds of millions of dollars
in annual economic impact that our company provided,” said
a statement attributed to US Fidelis Chief Executive Chris Riley
that was released Tuesday by company spokesman Ken Fields, of the
Fleishman-Hillard public relations firm.
The
statement claims that the company — a target of multiple government
investigation, including a coordinated one by 43 state attorneys
general — delivered “more than $280 million in annual
economic impact in Missouri.”
Earlier
this month, the company let go hundreds of employees in the call-back
sales and “saves” departments and elsewhere in the company.
This week, the lay-offs hit the main sales floor, where in the company’s
heyday hundreds of telemarketers sold contracts to consumers nationwide.
The
statement said the latest mass layoff was “a difficult decision.”
According to the statement, laid-off employees have been “paid
in full for all commissions and compensation due to this point,
including a severance amount.”
The
outgoing message for the company’s main sales number says
the office is closed for the holidays and instructs consumers to
“contact us at a later date.”
Here
is the company statement in full:
During
2009, USfidelis has implemented a comprehensive compliance program
that is designed to enhance the way we interact with customers
and potential customers. We have also been calling for regulatory
changes to ensure that all companies in this industry have to
live up to the same high standards, so that consumers can have
confidence in companies offering this much-needed product.
Unfortunately,
because of the difficult economy and increased speculation regarding
the entire industry as it has been changing, cancellations have
increased. That has caused us to make some difficult decisions.
As a result, hundreds of good, hard working people have lost their
jobs and the St. Louis area has lost hundreds of millions of dollars
in annual economic impact that our company provided.
USfidelis
remains fully staffed with its customer service and account resolution
divisions which assist consumers who have questions about their
existing vehicle service contracts. Each of those contracts is
secure and backed by top-rated insurance and administration companies.
Existing contract holders will continue to have vehicle service
claims paid from these independent companies that are separate
from USfidelis.
However,
until we fully address the issue of cancellations, we have had
to make further adjustments to suspend the work of our sales division.
This has been a difficult decision and one that we know will have
a personal impact on those directly affected. Each of those employees
has been paid in full for all commissions and compensation due
to this point, including a severance amount.
While
we know that there are many out there who wish our company was
still delivering more than $280 million in annual economic impact
in Missouri, USfidelis remains a large employer in this region
with more than 200 employees. We will continue to provide quality
customer service and advocate for necessary changes in this industry.
back
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November
12, 2009
Vehicle
Protection Association Acts In Advance of Missouri Attorney General
Enforcement Cases Against Certain Automotive Service Contract Vendors
Industry trade association notes the Attorney General's lawsuits
intended to protect consumers while citing progress on industry
reform via the VPA's Certification-Audit Program and new Standards
of Conduct.
The Vehicle Protection Association (VPA), an association recently
formed to protect purchasers of automotive service contracts, today
welcomed Attorney General Chris Koster to the campaign to further
improve the vehicle service contract industry. The VPA, while not
prejudging the merits of these lawsuits, will continue working with
all of its member companies to help ensure every company is in full
compliance with the law while preserving the ability of consumers
to obtain beneficial service contracts.
The
VPA believes that activation of its Certification-Audit Program,
announced in late September, and the implementation of its Standards
of Conduct for association members, announced this month, will help
to rein in any consumer-unfriendly actions that threaten the integrity
of the vehicle service contract industry. In addition, the VPA welcomes
the opportunity to partner nationwide with Attorneys General on
their common goal of protecting consumers from bad actors or companies
that refuse to make the needed changes.
"This
is an industry that offers considerable value to consumers who wish
to protect their investment in their vehicle. Unfortunately, however,
the industry has been tarnished by the actions of some companies,"
said Larry Hecker, executive director of the VPA. "It is our
goal that the VPA’s self-regulation process, coupled with
continued scrutiny from outside consumer protection entities, will
ensure that consumers are appropriately protected."
Certification-Audit
Program Improves Industry Transparency
The VPA's Certification-Audit Program allows consumers to determine
whether a service contract vendor is in compliance with Vehicle
Protection Association standards. None of the companies subject
to the new lawsuits were certified as compliant by the VPA.
Many
VPA members are currently undergoing certification inspection. The
certification process comprises a third-party compliance review
that thoroughly evaluates the company's adherence to the VPA Standards
of Conduct and applicable laws, rules and regulations.
"We're
very impressed with how the association’s members are aggressively
and proactively changing their industry. The association’s
rigorous certification process is focused on legal compliance and
consumer protection,” noted Betty Montgomery, Former Attorney
General from Ohio. “Firms that want to treat consumers right
are eager to set themselves apart from those who don't, and the
Certification-Audit Program is a great vehicle for doing so.”
Industry
Standards of Conduct Set the Bar for Good Behavior
In addition to its Certification-Audit Program, the VPA has recently
defined Standards of Conduct that are applicable to all VPA members.
Members who violate the Standards of Conduct will lose their membership
in the VPA. Among other topics, the standards address marketing
practices, mandatory disclosures and refund procedures.
"Our
Standards of Conduct will be vigorously applied to help protect
the best interests of the consumers," notes Hecker. "These
Standards are part of a much larger VPA program that is underway
to encourage industry members to comply with industry best practices
and all applicable laws, rules and regulations. In the future, as
a result of our efforts, consumers will know which vehicle service
contract vendors they could and should work with and can then rest
assured that they will be treated fairly by these vendors
The
Standards of Conduct are available to view at: VPA
Standards of Conduct
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November
10, 2009
Vehicle
Protection Association Approves Industry Standards
Adoption
of industry standards defines a code of conduct for automotive service
contract industry that will protect the best interests of the consumers.
The
Vehicle Protection Association (VPA), an association formed to promote
regulatory transparency, education and accountability in the marketing
and servicing automotive service contracts, announced today that
it has adopted a set of industry standards.
With
a new set of standards, the VPA has defined Standards of Conduct
that will both help members to comply with federal and state laws
and regulations as well as help to protect the best interests of
the consumers. Members who violate the Standards of Conduct will
lose their membership in the VPA.
"These
industry standards are more than a suggested guide for what companies
should be doing; they are our guiding principles," said Larry
Hecker, executive director of VPA. "While most of our members
already adhere to these rules, the adoption of these guidelines
will ensure that companies who wish to serve their customers best
will be better able to do so."
The
adoption of these industry standards is one of several steps the
VPA is taking to reform the industry's marketing practices. These
standards include specific rules for advertising, representation
of services, compliance with Federal Trade Commission and state
regulations, compliant telemarketing, and a consumer complaint process,
among other areas.
"During
this difficult economy, many Americans are holding on to the vehicles
they have purchased instead of buying new on a regular basis. These
same consumers rely on vehicle service contracts to help keep repair
costs manageable," Hecker said. "It is vital that consumers
can trust these contracts to protect some of their most valuable
assets. Our industry standards offer an extra level of protection
for consumers to reassure them that they can put their faith in
our member companies."
About
the Vehicle Protection Association
The
Vehicle Protection Association (VPA) is a not-for-profit trade association
representing firms that are active in the automotive service contract
industry. Members include service contract finance companies, marketers,
administrators, insurers, and software providers. VPA currently
has more than 50 members. The organization is committed to ensuring
regulatory compliance among members, educating consumers on their
rights, protecting consumers, and otherwise ensuring the integrity
of the automotive service contract industry.
back
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October
8, 2009
AA
Auto Protection Leads the Way in Compliance
In
an effort to protect consumers from predatory companies, the FTC
recently announced sweeping changes in the extended service contract
industry. Strict new regulations are in place to combat misleading
sales practices by some companies such as robo-call telemarketing,
failure to accurately disclose coverage and posing as the manufacturer
of a vehicle.
To
avoid confusion and help consumers better understand services being
offered, these new rules also forbid the use of certain terminology
such as “warranty” within the industry. This includes
use in company names, marketing and related material. As a result,
industry leader AA Auto Warranty is changing its name to AA Auto
Protection effective immediately and is working closely with the
Vehicle Protection Association (VPA) and other member associations
to better level the playing field and make sure all participants
abide by the new rules.
AA
Auto Protection led the way in 2005 by being the first company to
provide actual contracts for consumers to review online before purchasing.
“We recognized years ago that the best way to make sure consumers
fully understand exactly what they are purchasing is to show them
the actual contract before they sign the agreement”, said
Dan Rorapaugh CEO and founder of AA Auto Protection. “As a
result, we have one of the best track records in our industry with
the Better Business Bureau for a company that has been in business
as long as we have. Sure, any company can show up on the scene and
get an A+ record for a period of weeks or even months, but can they
maintain an excellent track record for an extended period of time?
That’s the real question. Since our first day in business,
we’ve refused to utilize the misleading practices which have
given much of the industry a bad reputation. We were thrilled to
learn of these new regulations and welcome the prospect of providing
even better service, not just for our customers, but for anyone
who protects their vehicle with an extended service contract.”
The
Vehicle Protection Association (VPA) is a not-for-profit trade association
representing firms that are active in the automotive service contract
industry. Members include service contract marketers, administrators,
payment processing companies, insurers, and software providers.
The organization is committed to advocating regulatory compliance
among member companies, educating consumers on their rights, protecting
consumers, and otherwise ensuring the integrity of the automotive
service contract industry. All members must pass a rigorous certification-audit
process.
AA
Auto Protection is a subsidiary of Guardian Web Company, LLC and
services all 50 states. For more information, please call 1.888.222.4445
or visit AAautoProtection.com.
back
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January 2, 2009
"Isn't it covered under my warranty?" This question
is asked thousands of times a day in dealership service departments
around the country.
The
federal government requires that car makers provide extended warranty
coverage on emission systems.
Many
people assume that a car warranty entitles them to repairs regardless
of environmental conditions, maintenance requirements, and/or length
of time/number of miles on the vehicle.
A
car warranty is not an entitlement. It is an agreement between you
and the car manufacturer! The purchaser of the warranty is responsible
to follow the specified maintenance requirements set forth by the
manufacturer.
Then,
and only then, is the manufacturer obligated to perform any repairs
due to a defect from poor workmanship or a failed part for the time
or mileage set forth by the terms of the warranty agreement.
In recent years, because of some questionable practices by dealers,
car manufacturers now scrutinize every warranty claim that comes
across their desks. Such close inspection of warranty claims is
interpreted by the consumer as an attempt to get out of covering
a particular repair.
AOL Autos: Best cars for winter
However, in actuality, the repair may not qualify under the warranty
terms due to a number of conditions, ranging from abuse of the vehicle,
expiration of the warranty because of time or mileage, or an uncovered
part as per the agreement.
My
advice to the buyer: Read your warranty agreement carefully, fulfill
your part, and then you can expect the manufacturer to fulfill their
part.
Don't
Miss
Some types of warranties
Corrosion warranty: A type of warranty that covers rust-through
perforation on sheet metal with actual holes. Surface corrosion
from nicks, chips, and scratches are not covered (usually due to
environmental conditions).
Coverage varies with each manufacturer, so check your warranty information
or check with your dealer for specific details on coverage.
Emissions warranty: The federal government requires that car makers
provide extended warranty coverage on emission systems to ensure
lower tailpipe emissions.
Typical coverage is seven to eight years and 70,000 to 80,000 miles.
If you have a drivability problem on a late model vehicle, make
sure to check with your dealer on emissions warranty coverage before
paying for the repair.
AOL Autos: Least-polluting
cars
Customized conversions: Some vehicles (usually vans and limos) are
covered under separate warranties for the add-ons not installed
by the manufacturer. Be sure to obtain a written warranty disclosure
for the conversion when purchasing these types of vehicles. Make
sure you (and your dealer) completely understand the 'ins and outs'
of conversion vehicle warranties.
I have witnessed nightmares resulting from misunderstandings when
it's too late -- after the customer has taken delivery of the vehicle!
AOL Autos: Luxury cars for
families
Hidden warranties: Also called "Goodwill Adjustments."
Manufacturers sometimes allow their dealers or field reps to make
"Goodwill Adjustments" once a vehicle is out of warranty
time and/or mileage. Decisions to do so are based on certain criteria
such as owner's loyalty, time the
vehicle
has been in service, maintenance records, vehicle history, mileage,
and whether any service contracts are in effect.
Customers may be asked to share some of the cost of the repair with
the car maker in a "Goodwill Adjustment." Never be afraid
to ask for assistance. You've got nothing to lose!!
AOL Autos: 10 cars that sank
Detroit
Campaigns: Sometimes a car maker will embark on a "Campaign."
This type of warranty is usually associated with a safety defect
and is often a positive PR move. Campaigns can take the form of
a repair or a warranty extension.
Although it is not a recall, the campaign is either an agreement
between the car maker and the NHTSA or it is a course of action
the car maker has taken to ensure the safety of its customers without
going to recall (to maintain good PR with the public).
AOL Autos: 10 cars that could
save Detroit
Aftermarket: These items fall under their own manufacturers' warranties.
For example, tires, after-market stereo systems, and conversion
components are not made by the car maker and thus not covered under
the vehicle warranty.
You
will usually find these warranties in the paper work you received
at the time of vehicle delivery. Read the paperwork and educate
yourself to avoid assumptions and misunderstandings! Make sure you
know what's covered and by whom!
With
respect to new car warranties, it's important to understand that
warranty repairs are a revenue source for the dealership. So when
dealers refuse coverage, it's not because they want to. They simply
cannot... based on the warranty agreement and the very strict adherence
to the agreement expected by the manufacturers.
Extended warranties (one of my favorite controversial
topics)
If
you keep a vehicle beyond its warranty period, than I highly recommend
an extended warranty. Consider the cost of repairs. The average
transmission replacement is around $2,500. Engines cost in the neighborhood
of $4,000. In-vehicle electronics can cost a small fortune. Be smart
and get an extended warranty on a vehicle if you are going to keep
it beyond the factory or dealer warranty.
The
arena of extended warranties has evolved in light years. Just fifteen
years ago, extended warranties were either offered by the car makers
or by obscure little companies selling a bill of goods, denying
every claim that came into their 'call centers.'
However, today companies like AIG, Allstate, and NAPA have thrown
their hats into the ring, adding credibility and offering genuine
coverage to motorists. The caveat here is to research the company
before buying. Who is the warranty administrator? Do they have a
good track record? Are they difficult to deal with? To whom should
you ask these questions? The Service Department Manager or writer.
These people work with extended warranty companies all the time
and know who is reputable and who is not.
Some
companies offer tiered coverage depending on vehicle mileage, year,
service description (how it's used), and condition of the vehicle
at the time of contract purchase. Most extended warranty companies
require that you have an in-depth inspection of the vehicle performed
by a company-approved inspection station before they will allow
coverage. This is understandable when you consider pre-existing
conditions like engine or transmission wear/damage.
Some
companies offer plans with no deductibles or tiered deductibles.
The method of payment of claims varies. Some plans allow for immediate
payment to the service provider via the use of a company credit
card. These are the best, because the service provider gets paid
immediately and therefore is more willing to deal with the extended
warranty company. Others plans require that you first pay the bill,
and they reimburse you later after you send supporting documentation
for the claim into their fulfillment department.
The
bottom line? Know whom you are dealing with before purchasing an
extended warranty (and read the fine print).
Tom Torbjornsen is a veteran of 37 years in
the auto service industry, an automotive journalist registered with
IMPA
back
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August 25, 2008
AA Auto Warranty
Joins the Automotive Warranty Services Association
AA
Auto Warranty, LLC., the leader in automotive extended warranties,
is proud to announce that it is a founding member of the Automotive
Warranty Services Association (AWSA).
AWSA
was created by a group of warranty providers who are concerned about
the direction of the auto warranty industry, and who are committed
to a proactive approach to improving it. The aim of members of AWSA
is to enhance the entire industry, by establish standards and by
enforcing compliance to them. The ultimate goal is to universally
improve the auto warranty industry for companies and customers alike.
Warranty companies that do not adhere to the high standards of AWSA
will be clearly distinguishable from those that do. The desired
result is to provide consumers an easy, positive, and straightforward
experience when shopping for a warranty.
As
stated in their Preamble, AWSA has established guidelines to promote
“the ethical conduct of business with consumers.” Among those pioneering
guidelines is a Customer Bill of Rights. It states, in part, that
“A customer has the right to:
-
Not
to be subject to unfair, deceptive, abusive, or high pressure
sales tactics.
-
Accurate
information presented in a clear and understandable manner.
-
A
written disclosure of all details associated with a warranty
contract.
-
Respectful,
professional, and accurate responses to all product questions
and requests.
Additionally, the AWSA guidelines address such diverse and important
areas as advertising, telemarketing, refund policies, data collection,
privacy, and consumer complaints.
Joining AWSA is “a necessary step to improving customer confidence.
It also helps separate our company from the ones sending postcards,
making cold calls, and misrepresenting who they are, what they do,
what they cover, and what they cost,” said Dan Rorapaugh, CEO of
AA Auto Warranty. “By being a part of AWSA, we want to help raise
the bar in this business, which has definitely been lowered in the
last few years. We also want our customers to know that we think
we can be successful by being honest, low-pressure, and by just
being professional,” adds Rorapaugh.
AA
Auto Warranty is pleased to join with the other members of AWSA
to help protecting the auto warranty industry, and the millions
of customers who benefit from its services.
For more information about AA Auto Warranty, visit
http://www.aaautowarranty.com
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June 25, 2008
Extended Auto Warranties
Help Consumers Control Expenses
The sluggish
economy is forcing consumers to try to better control their budgets,
to minimize large expenses, and to reduce financial risks. Many
Americans are only one paycheck, one rent payment, or one car payment,
away from financial ruin.
The luxury
of the choice to buy a new car has disappeared for many, as the
record losses of the auto manufacturers indicate. But that doesn’t
mean that people are no longer driving. It means that people
are keeping their current vehicles longer, rather than getting new
ones.
However,
there is a silent risk for people who will keep their current car:
That of a major, unexpected failure, requiring an expensive repair.
Some vulnerable people are only one major repair away from financial
collapse, and don’t even recognize the danger. A $600 repair for
a broken power window may be safely postponed. But a $2500 transmission
repair cannot be ignored, because the vehicle may not be drivable.
The problem is compounded in that, without a vehicle to drive to
work, there is no income to pay to repair the car. Having a functioning
vehicle is not just a convenience in modern life, it’s a necessity.
For such
people, there is a way to eliminate that risk, and to truly control
their budget: Obtaining an extended vehicle service contract, popularly
known as an extended warranty. By getting an extended warranty,
consumers can proactively control their expenses for a major tool
they use every day, their car.
With a quality
extended warranty, consumers are protected against unexpected vehicle
repairs, even the smallest of which can cost upwards of $500. Extended
warranties are available for most vehicle for terms generally ranging
from two to seven years, with prices between $1300-2800 for comprehensive
coverage. Those prices can almost always be paid monthly. An expected
$80-150 per month warranty payment is much easier to budget for
than a surprise $3000 engine repair, which takes the vehicle out
of commission.
Amber Gizzy
of Warminster, PA, had intended to use her tax rebate toward a new
vehicle, but decided her financial condition was too unpredictable.
She had heard that a popular consumer magazine advised its readers
against an extended warranty, which she was considering. “My mind
was pretty much made up that I wasn’t going to get a warranty, then
my sister’s car fell apart,” said Gizzy. “She ended up paying almost
$2000 to fix her transmission, and my husband and I actually
had to lend her some of that,” she explains. “The worst part was,”
Gizzy notes, “that she had to miss a few days of work because she
had no way of getting there. She almost lost her job. Her car was
just out of warranty but not even really old, so that whole experience
definitely changed my mind about getting a warranty.”
Gizzy’s story
is not unique. Peter DiPersio, a service advisor in Boulder, Colorado,
says that there’s an obvious difference between customers with a
warranty and those without one. “The average day at my shop sees
repair costs anywhere from $400 to $3000 in some cases,” said DiPersio.
DiPersio adds that “Right now because the economy’s so bad people
are putting off expensive repairs because they have to, if they
can, even though I tell them that their just going to be back here
with even bigger problems. The people with warranties just tell
me to fix whatever the problem is, whatever the price, because they
aren’t paying for it anyway.”
Amber Gizzy
said that her extended warranty cost about $1700 for four years,
which she is paying for monthly. She explains that “Even I can budget
for $110 a month if I know it’s going to be coming up every month.
But I definitely know I won't have $2000 or whatever to pay for
something wrong with my car if it just happens suddenly. And I need
my car!”
There are
many quality companies offering extended warranties. AutoWarrantyResearch.com,
which launched in May, offers a free, complete, user-friendly guide
to finding and purchasing an extended warranty. With an extended
warranty, consumers can help their lives become a little more predictable,
and can help make sure that their vehicle is ready when it is needed.
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May 30, 2008
The Advantages
of Online Auto Warranty Shopping
As worries about the economy grow,
people’s desire to spend big bucks for a new car shrinks. So many
are exploring the option of an extended warranty to protect their
current vehicle. And, more important, to protect themselves from
unexpected, and high, repair bills. We are pleased to introduce
AutoWarrantyResearch.com as user-friendly, informative guide for
consumers seeking objective warranty information.
We offer a complete auto warranty
glossary, a frequently-asked questions section, and a comprehensive
summary of warranty fundamentals. We also provide links that can
help consumers research other aspects of their automotive needs.
Our goal is to provide unbiased, verifiable, quality information
for consumers investigating auto warranties.
The AutoWarrantyResearch.com staff
has decades of experience in the automotive, warranty, and insurance
industries. We’ve pooled our resources and combed our contacts to
produce the most authoritative and comprehensive online resource
for consumers.
The demand for quality auto warranties
has lead to an expansion of the industry. With more options, better
quality companies, and prices much less than the average new car
down payment, now is a great time to buy an extended warranty.
Not long ago, consumers were captive
to the high prices and limited selection of dealership warranties.
Now, just as the internet has revolutionized shopping for books,
music, and so many other things, finding an auto warranty that is
perfect for a consumer’s needs and budget takes only a few keystrokes
and mouse clicks. Yet, not only is buying a warranty online simply
another option, it’s an altogether better option than going
with the car dealer.
Here are some of the major advantages
for consumers who take their warranty search online:
More Choices
While a dealership
can offer only a handful of plans, warranty companies online – especially
brokers – have hundreds of warranty plans available. The
large selection means that consumers can choose a service program
that suits exactly their needs, both for coverage and for price.
Cheaper Prices
Car dealerships take advantage of the “contrast effect” when selling
a warranty after the customer says “yes” to their new car: What’s
another $2500 after just agreeing to spend $35,000? Dealers can
charge whatever they want for car warranties – and they do. For
warranty companies online, the competition for customers among them
for customers keeps prices way below those of dealers. A warranty
that would cost a consumer $2500 is sometimes $1000 less using an
online company.
Better Coverage
Auto warranties that include wear-and-tear coverage, rental car
and roadside assistance benefits, with terms up to seven years and
an additional 150,000 miles are available – but consumers will never
know it if they rely on their car dealer. Manufacturer’s extended
warranties include the same terms and features that have been around
for 25 years. Warranty companies online have the industry’s newest
innovative plans, offering coverage and terms that are even better
than the vehicle’s original warranty.
More Customer-Friendly
Companies with an online presence that intend to remain in business
understand the importance of keeping their customers happy. The
best warranty companies online have customer service departments,
well-trained and knowledgeable consultants, and are open at least
12 hours a day, and 6 days per week. Anyone who has ever tried to
get in touch with the dealership’s Business Manager to try to ask
a question about a warranty will appreciate the good customer service
the majority of warranty companies online provide.
We encourage consumers interested
in learning about extended auto warranties to break free of the
dealer’s grasp, and to investigate the many online warranty options.
Consumers can save themselves time and money. A good place to start
their search is AutoWarrantyResearch.com.
Marc Karman
Editor
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May 26, 2008
Preventing
Car Loan Delinquencies
If
you think homeowners are the only ones taking a beating in today's
economy, think again. While the mortgage crisis is still making
headlines the number of Americans falling behind on their car loan
is skyrocketing.
If you're in trouble, how can you get back on 'the road'
to recovery without losing your wheels?
Paula San Gabriel never buys things she can't afford. So before
she snagged a stylish SUV, she first made sure the payments were
within reach.
"I took into account my current pay, salary, and then I took
into account my bills such as insurance and gas," she explained.
Everything checked out, so Paula took the truck. But, about a year
into her loan, the SUV broke down and needed a new engine. She had
no warranty or the $6,000 to cover repairs.
Paula said she had no choice: she missed a loan payment. Immediately,
her lender started calling. It's a story auto experts are hearing
more and more.
Philip Reed, Edmunds.com, said "If you are having difficulty
making your auto loan right now, you're definitely not alone."
In fact, delinquencies on auto loans are at the highest rate in
nearly two decades with repossessions expected to jump 10 percent
this year alone.
"We estimate that 1.6 million cars will be repossessed this
year," said Reed.
It's such a problem some auto auction companies are running
out of space!
Tom Kontos, Adesa auto auction company, said "On several of
our auctions that have received a large number of these repos, we've
had to procure off site lots in order to store the vehicles."
Banking and auto experts say there's no doubt, the economic
trouble first felt in the housing market is spreading.
James Chessen, American Bankers Association, said "There's
job loses out there, there's fewer new jobs being created to
reemploy people. It's plain and simple an economic consequence."
To complicate things more, many car owners now lock into longer
loans - five, six, even seven years. Then, if they have to get out,
they're often 'upside down', meaning they owe more than
the car is worth!
No matter what the circumstances, if you miss a payment or even
think you're in trouble all the experts we spoke with agree:
Chessen said, "The lender always wants to work with the borrower
because they don't want to get that car back."
So you may have power to strike a deal, but it's critical to
address the problem head on and contact your lender immediately.
“Essentially what they do is they may give you a small grace period,
several months to keep up, but at least they won't begin the
process of repossession,” said Reed.
Paula's lender agreed to push her loan term back two months
giving her some extra breathing room.
Paula is back on track paying her auto loan and is saving up money
to get her SUV back on the road. In the meantime, she picked up
a car for $1,600 dollars in cash, just to get her to and from work.
source:
http://www.wxyz.com
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May 15, 2008
Let the Buyer
Beware.com
The cliché that the
internet is like the Wild West resonates because it’s a generally
accurate description. At least in our collective imagination, the
West was wild because of the lack of law enforcement, or at least
strict law enforcement. People did what they could get away with,
simply because they could. The same is unfortunately true for many
internet businesses, warranty companies not excepted.
In that highly competitive
industry, companies go to great lengths to stand out, and to make
a positive statement about themselves. It’s when those statements
are not bound by the limitations of truth that the consumer is put
at risk. A warranty company’s website is its most powerful marketing
tool. On their websites companies say many things to try to appeal
to the customer and to set themselves apart. But, how much of what
they are saying is true?
Naturally, the truthfulness
of a company is a measure of how important honesty is to it, of
how much honesty is a part of its corporate culture. Simply put,
if a warranty company makes misleading statements on its website,
how much should it be trusted to take care of us? How much faith
can we have in its products? The general lack of regulation on the
internet makes lying with impunity very easy. But companies that
make deceptive claims should be exposed, and that’s why we’re taking
a hard look at what warranty companies are asking us to believe,
and whether we should.
The transgressions range
from silly to serious. On the silly end of the spectrum, we have
claim from Auto Service Warranty, whose website boasts that they
are “Rated #1 in Customer Satisfaction.” But, who bestowed the rating?
And when? The website does not elaborate. You can imagine why.
Continental Warranty’s
website wants you to know how important customer service is to them.
They say “Perhaps
most importantly: we believe in a straightforward way of doing business.
When you decide to purchase an auto warranty with Continental Warranty,
you will get the quality and service you pay for. Plain and simple.”
That “plain and simple” approach has rewarded them with nearly 300
complaints over the last 36 months on their Better Business Bureau
report. They style themselves the “industry leader,” and they are
- for their astronomically high number of complaints.
Carchex, also known as Smart Auto
Warranty, is at least a bit more modest. They do not highlight their
customer satisfaction record at all. Indeed, Carchex/Smart Auto
Warranty Company is so shy about their customer service record that
they have not even bothered to become an accredited member of the
Better Business Bureau. That is typically the first step any online
company takes that wants customers to know that it can be trusted.
On the extreme end of the deception
spectrum is Warranty Direct. They carefully protect their reputation,
yet recklessly mislead consumers with their website.
Warranty
Direct does not want you to read the following:
The companies focused
on here are not the only ones that don’t let the truth stand in
their way of a good slogan. However they are among the most popular,
and therefore, we believe, have even a greater responsibility to
be truthful and honest in their marketing. It’s all-too easy for
a successful company to succumb to greed and to engage in practices
that may bring more profit in the short-term, but will certainly
bring ruin in the long-term. “Sunlight is the best disinfectant,”
the old saying goes, and we’re happy to shine a bright light on
some shady practices.
The Wild West was simply
too big for law enforcement to cover. Similarly, the internet, with
its billions of sites, is simply too massive to allow policing by
regulators. In the Wild West, when law enforcement couldn’t do the
job, a posse of citizens would meet out rough justice. And again,
in a different time and context, in order not to be tricked by the
people who want our money, we have to be an electronic consumer
posse for the 21st century.
Consumer references
for this article:
http://www.labbb.org/BBBWeb/Forms/Business/CompanyReport_Summary.aspx?CompanyID=13128932&sm
http://greatermd.bbb.org/WWWRoot/Report.aspx?site=41&bbb=0011&firm=23015869
http://www.nscic.com/management.html
http://www.answers.com/topic/interstate-national-dealer-services-inc?cat=biz-fin
http://biz.yahoo.com/ic/51/51834.html
http://www3.ambest.com/ratings/FullProfile.asp?Bl=0&AMBNum=11820&AltSrc=4&AltNum=410&URATINGID=1095643&Ext_User=&Ext_Misc
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April 11, 2008
Extended Vehicle Warranties: Knowing a Good Investment From a
Good Scam
Late
last month the Missouri Attorney General announced lawsuits against
five companies that offer extended vehicle service contracts, popularly
known as extended warranties. The lawsuits allege misleading statements
and failures to disclose critical information about coverage and
procedures. How do consumers know whether they are working with
a responsible company?
According
the Missouri Attorney General’s website, the companies being sued
engaged in the following practices:
-
Sending
mailings to customers which mislead them into thinking that
their warranties will soon expire.
-
Misrepresenting
themselves as agents of the vehicle manufacturer.
-
Failing
to cover the components that are agreed to be covered.
-
Failing
to tell customers about certain requirements of the warranty
necessary for the warranty to pay claims.
The
firms being sued are essentially telemarketing operations which
happen to sell vehicle warranties. They purchase lists of customers
from lenders, dealerships, vehicle manufacturers, or other sources,
and directly market to those customers, typically by sending postcards.
Giving credibility to the mailings is that the consumer’s vehicle
information is printed on the postcard, and the return address or
company name is, in one case, “Dealer Services.” Consumers may be
forgiven for believing that the mail they have just received originated
from their dealership, and is backed by the manufacturer. In fact,
it is from a third-party telemarketer unaffiliated with any car
dealer, or any manufacturer. The unwillingness to identify themselves
properly, and to intentionally mislead consumers, are parts of the
reason that these companies are being sued. The other part is that
the warranties they are selling are poor quality.
The
companies being sued are:
-
National
Auto Warranty Services (“Dealer Services”)
-
Certified
Auto Warranty Services
-
Smart
Choice Protection
-
Service
Protection Direct (TXEN Partners)
-
National
Dealers Warranty
Trustworthy, responsible
companies that offer vehicle warranties are out there. Such companies
are registered and accredited with their local Better Business Bureau,
and should have very few complaints – well under 100. Honest warranty
companies will have their contracts posted online, requiring no
commitment or payment to view them. They will not hesitate in identifying
themselves as either warranty brokers, or direct sellers of their
own plans, unaffiliated with any dealership or manufacturer. Reliable
warranty providers will also have a rigid privacy policy which forbids
the selling or distribution of customer contact information. A good
warranty company will contact a customer in response to a person’s
inquiry, rather than making an unsolicited phone call or sending
an advertisement through the mail which pretends to be a notification
of warranty expiration.
Vehicle service contracts
can be a worthwhile investment, as millions of car-owners have learned,
and many others who pay expensive repair bills have realized. Selecting
a dependable company demands the same caution necessary with any
other high-ticket item. For the careful consumer, the signs of a
company people can trust are as clear as the signs of a scamming
company are now notorious.
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April 3, 2008
Would You Like Some Risk with Your Warranty?
The
corporate irresponsibility of the early part of
this decade was not confined to big names like Enron,
WorldCom, and Global Crossing, nor to the energy
and telecommunication industries. There were some
high profile failures in the auto warranty industry,
due to certain companies being built on the cheap.
But the consumer ended up footing a huge bill after
their warranty providers went belly-up.
With people keeping their cars longer due to a sluggish
economy, consumer protection organizations are again
sounding sirens about the common cause of the collapse
of most warranty companies: The RRG.
A risk retention group (RRG) is essentially a pool
of money contributed by multiple warranty companies,
from which these companies can draw if their own
reserve accounts are strained by unusually high
claims costs. Many warranty companies succumb to
the temptation of joining an RRG because the associated
costs are so low, since it amounts to being self-insured.
In the competitive world of auto warranties, keeping
costs low – therefore prices low - can give that
needed edge to attract consumers.
The more expensive alternative for warranty companies
is to pay for independent, direct insurance from
an established insurance company. The costs are
higher for the warranty company, so that their policy
prices may be higher, too. The amount of money available
to a large insurance company, however, is vastly
greater than that which is available to an RRG.
If a warranty company is suddenly hit with high
claims, the amount of cash at hand is what determines
whether your warranty contract will pay your thousand-dollar
claims for the next several years, or whether it’s
merely an expensive piece of paper.
RRGs are vulnerable to failure because, compared
to traditional insurance companies, they are
weakly regulated, poorly funded, and most important,
are linked to the warranty companies that they are
supposed to protect, and are therefore subject to
the same pressures straining the warranty company’s
own reserve accounts, and subject to the same (mis)management
of their associated warranty companies.
The warnings from consumer advocates about RRGs
seem well-founded: Every major failed warranty company,
most notoriously Warranty Gold, Ultimate, and First
Assured, were backed by an RRG. Those companies’
customers may have spent slightly less for their
policies compared to other companies they researched.
But, years later, the money they saved has been
paid out of their own pockets many times over in
car repairs that their defunct warranty companies
were supposed to pay. It’s best not to even ask
one of these customers whether they have, or will,
ever get their warranty price refunded. They won't.
Just because a warranty company uses an RRG doesn’t
mean that it will fail. It means, however,
that if it encounters financial dire straits – which
can happen anytime, especially these days - the
likelihood of complete meltdown is much higher,
because less money is available, compared to a warranty
company that is directly insured by a traditional
insurance company.
Based on the history of the last decade, the security
that warranty-purchasers seek will not be found
in a company whose financial health relies on a
shaky entity that has “risk” built into its name.
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