CarShield to pay $10 million settlement over deceptive ads
CarShield, a prominent seller of vehicle service contracts, has agreed to a $10 million settlement with federal regulators over allegations of deceptive marketing practices. The Federal Trade Commission (FTC) announced the settlement on Wednesday. Thus, highlighting how CarShield’s advertising misled consumers about the coverage and benefits of its repair contracts.
Deceptive Advertising Tactics
CarShield utilizes celebrity endorsements from figures like rapper and actor Ice-T and sports commentator Chris Berman. They have claimed to provide “peace of mind” and protection from costly vehicle repairs through its service contracts. However, the FTC found that many consumers who purchased these contracts discovered that the promised coverage was often not available when needed.
One particular advertisement aired 18,000 times on television. As a result, it misleadingly assured customers that CarShield’s administrators would ensure they were not burdened with expensive repair bills. The FTC’s investigation revealed that despite customers paying up to $120 per month, many repairs were not covered under the contracts.
FTC’s Charges and Settlement
The FTC also charged American Auto Shield, LLC (AAS), the administrator of CarShield’s contracts, with participating in the deceptive scheme. According to Samuel Levine, director of the FTC’s Bureau of Consumer Protection, CarShield’s ads left many consumers with a “financial headache” rather than the promised “peace of mind.”
Levine further criticized CarShield for using trusted personalities to deliver false promises. Thus, emphasizing that the FTC will hold advertisers accountable for exploiting consumers’ financial anxieties with deceptive claims.
CarShield’s Response
In response to the FTC’s charges, CarShield issued a statement expressing disagreement with many of the FTC’s assertions. Nevertheless, the company affirmed its commitment to ensuring customers fully understand the services and value they offer. As a result, CarShield has updated its marketing materials to include more detailed information about the repair coverage provided by their contracts.
The company also announced enhancements to their Shield Repair Network. Thus, adding over 10,000 preferred repair shops and implementing a concierge system to help customers quickly find convenient repair facilities. These steps aim to improve customer satisfaction and transparency regarding the coverage details.
Mixed Customer Feedback
Despite CarShield’s A+ rating from the Better Business Bureau (BBB), the company’s BBB listing includes more than 300 pages of complaints and a low customer rating of 1.6 out of 5. A recent report from a Missouri-based news station revealed that CarShield had sued the BBB. However, it ended up being a case that was settled out of court.
Similarly, American Auto Shield, based in Colorado, holds a 2.9 customer rating despite its A+ BBB rating. The disparity between official ratings and customer experiences shows ongoing concerns about the quality and reliability of the service provided by both companies.
Conclusion
The $10 million settlement between CarShield and the FTC underscores the importance of truthful advertising and the protection of consumer rights. While CarShield has taken steps to address the issues raised by the FTC, the company faces ongoing challenges in rebuilding trust with its customers.
As CarShield continues to refine its marketing and customer service practices, it remains to be seen how these changes will impact consumer perceptions and satisfaction. For now, the settlement serves as a cautionary tale for businesses about the consequences of misleading advertising.
Source: NBC News
