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Will Many Debt Settlement Marketers Start Selling Extended Warranty and Vehicle Service Contracts?

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Vehicle service contracts or extended auto warranties have come under fire as the Federal Trade Commission warned consumers last year to steer clear. “these pitches are from unrelated businesses that want to sell you extended warranties — more accurately known as service contracts — that often sell for hundreds or thousands of dollars.”

The kicker is that the president of The Association of Settlement Companies, Robby Birnbaum, Esq. is also evidently a major player in the vehicle service contract business as well.

We are proud to introduce our GOLD SPONSOR, Robby Birnbaum partner at the Law Firm of Greenspoon Marder, P.A.

Your job is to make money and offer high-quality services to your customers. Greenspoon Marder is nationally known for efficiently helping companies like yours do exactly that. Robby Birnbaum, a partner at the firm, represents highly regulated businesses that market and sell Vehicle Service Contracts.

Mr. Birnbaum’s firm pioneered this industry, and today, he helps dozens of clients stay profitable.

Birnbaum aggressively helps his clients handle telephone sales requirements and is no-nonsense, when it comes to proactively keeping your business compliant and the regulators away.

Birnbaum leads a staff of highly trained regulatory attorneys and paralegals that focus on your industry. They are not general practitioners. All aspects of direct-mail advertising, automated messaging, licensing, state and FTC matters, outbound and inbound calls, contracts with suppliers, and credit-select marketing techniques are handled.

Every client is handled on a priority basis. The strongest, pro-business relationships with state and federal regulators are what you need. Get to know us, and let us impress you and earn your trust. – Source

I’m not sure it is telling but I was surprised to find such a direct connection between two industries under fire and find the president of TASC also labeled as the pioneer of the vehicle service contract industry.

Here is what the Federal Trade Commission has to say about the vehicle service contract business.

FTC Warning on Vehicle Service Contracts

How to Steer Clear of Auto Warranty Scams

The Federal Trade Commission (FTC), the nation’s consumer protection agency, urges you to be skeptical of mail and phone calls warning that the warranty on your car is about to expire. The companies behind the mail and calls may give the impression they represent your car dealer or manufacturer. With phrases like Motor Vehicle Notification, Final Warranty Notice or Notice of Interruption, they are trying to make the offer seem urgent — and to get you to call a toll-free number for more information.

More than likely, these pitches are from unrelated businesses that want to sell you extended warranties — more accurately known as service contracts — that often sell for hundreds or thousands of dollars. If you respond to a call from a business pitching so-called extended warranties, you’re likely to hear high-pressure sales tactics, as well as demands for personal financial information and a down payment, before you get any details about the service contract. And if you buy a service contract, you may find that the company behind it won’t be in business long enough to fulfill its commitments.

Protect Yourself

So how can you steer clear of scam auto warranty offers? The FTC says:

  • If you get mail or phone calls about renewing your vehicle warranty, don’t take the information at face value. Your vehicle’s warranty may be far from expiring — or it may have expired already. If you have a question about your warranty, check your owner’s manual, call the dealer who sold you the car or contact the vehicle manufacturer.
  • Be alert to fast talkers. Telemarketers pitching auto warranties often use high-pressure tactics to hide their true motive. Take your time. Most legitimate businesses will give you time and written information about an offer before asking you to commit to a purchase.
  • Never give out personal financial or other sensitive information like your bank account, credit card or Social Security numbers — even your driver’s license number or Vehicle Identification Number (VIN) — unless you know who you’re dealing with. Scam artists often ask for this information during an unsolicited sales pitch, and then use it to commit other frauds against you.
  • Be skeptical of any unsolicited sales calls if the call is a recorded message or if your phone number is on the National Do Not Call Registry. You shouldn’t get recorded sales pitches unless you have specifically agreed to accept such calls, with few exceptions — read New Rules for Robocalls to learn more. And if your number is on the National Do Not Call Registry, a salesperson may call you only if you have agreed to accept calls from the company the salesperson works for, if you have bought something from the company within the last 18 months or if you have asked the company for information within the last three months. To report violations of the National Do Not Call Registry or to register a phone number, visit DoNotCall.gov or call 1-888-382-1222.

Service Contracts

A service contract is a promise to perform (or pay for) certain repairs or services. Although a service contract is sometimes called an extended warranty, it is not a warranty as defined by federal law. A service contract may be arranged any time and always costs extra; a warranty comes with a new car and is included in the original price. Used cars also may come with some type of coverage. The separate and additional cost distinguishes a service contract from a warranty.

Auto service contracts may be sold by vehicle manufacturers, auto dealerships or independent providers. If you want to buy a service contract, shop around so you understand just what you’re buying. Coverage varies widely. Other tips:

  • Research the company responsible for paying your claims (usually called the contract administrator or the service contract provider). Service contract sellers (also called brokers) do not decide what repairs are covered under the service contracts they sell, and they may assert that they have no further responsibility to you once you buy the service contract.
  • Check on licensing and registration within your state. While many states do not regulate contract administrators, some states (including California, Florida and New York) have strict regulations.
  • Before you do business, check out the seller and the contract administrator with your state Attorney General (naag.org), local consumer protection agency (consumeraction.gov) and the Better Business Bureau (bbb.org) to make sure no unresolved complaints are on file. The phone numbers for these organizations are in your phone book or available through directory assistance or Internet directories.

To learn more about service contracts and questions to ask a contract administrator, read Auto Service Contracts.

US Fidelis

One of the big players in this market is a company you may recognize, US Fidelis.

One consumer says that the vehicle service contract only took her money and provided no benefit.

The vehicle service contract market has been under investigation by attorneys general in more that 40 states for unfair and deceptive practices.

The founder and president of US Fidelis, Darain Atkinson is a convicted felon for theft, burglary, forgery and counterfeiting. The company also gives the impression it is a faith-based company alleges NBC News.

It you want to read some very disturbing complaints about this company, click here.

Under intense scrutiny, US Fidelis went bankrupt under a Chapter 11 bankruptcy on March 1, 2010. According to an article in the St. Louis Post Dispatch:

Two years before US Fidelis found itself out of cash and unable to withstand a tidal wave of customer cancellations, the brothers who own the Wentzville-based company already had pulled more than $100 million out of it, according to a former top executive who kept the books at the time.

Darain and Cory Atkinson accumulated that nine-figure sum through a mix of traditional executive compensation and shareholder distributions, said Philip Jehle, who served as the company’s chief financial officer and vice president of operations from 2004 through 2007. The brothers used the funds to pay for luxury cars and boats, as well for mortgage payments on mansions and vacation homes, Jehle told the Post-Dispatch in an exclusive interview.

During its heyday, US Fidelis was the nation’s No. 1 seller of extended auto-service contracts before it was beset by accusations of selling warranties that were worthless and using illegal telemarketing ploys. The company’s financial practices, including the free-wheeling way it rewarded the Atkinsons, were so startling to another financial executive that he said he quit the company after just a few months on the job.

“There was no formality to the process whatsoever,” Jehle said of the Atkinsons’ supervision of the company. “They were two hayseeds who were like kids in a candy store.”

On Thursday, Missouri Attorney General Chris Koster’s office accused the brothers of plundering the firm to keep assets out of creditors’ reach, and urged a bankruptcy judge to appoint an independent trustee to run the company.

At least 600 of those employees were laid off in November and December; a bankruptcy court has allowed the firm to keep paying about 100 workers whose primary job is to persuade customers not to cancel coverage. That’s because US Fidelis must pay back its finance company every time a customer cancels. Its biggest finance company is Chicago-based Mepco Finance Corp.

Read more, here.

On May 5, 2010 The State of Washington and seven other states — Arizona, Iowa, Idaho, Kansas, North Carolina, Ohio and Wisconsin — filed civil lawsuits today against Credexx Corporation, of Irvine, Calif., and its president, David J. Tabb. Credexx does business as Auto One Warranty and Auto One Warranty Specialists.

The states are also suing recently defunct U.S. Fidelis and are asking that an independent trustee be appointed to manage the company’s assets during bankruptcy proceedings.

Assistant Attorney General Mary Lobdell, with the Washington Attorney General’s Consumer Protection Division, led the investigation. It began in 2008 with 18 states and swelled to approximately 40. She said the defendants are responsible for millions of illegal mailers and telemarketing calls.

“U.S. Fidelis and Credexx created an impression that their service plans were ‘extended warranties’ provided by car manufacturers or dealers that provide ‘bumper to bumper’ coverage of all major repairs,” Lobdell said. “Unfortunately for consumers, their representations were lies.” – Source

Will Many Debt Settlement Marketers Start Selling Extended Warranty and Vehicle Service Contracts?
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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  • Max

    Steve-

    Do you have an extended service contract on your vehicle? I do! Only I didn’t pay the dealer way too much for it and have the same A-rated insurer backing my policy as the one the dealer sells. Yes, “Product Warranties” were certainly a questionable offering, but any product labeled a “Vehicle Service Contract” is exactly the same thing the dealer is selling you and is typically offered for less money through a direct-to-consumer agent or company. Of course, consumers also need to make sure that the product they are signing for matches the service level they thought they were signing up for, since unfortunately some greedy folks at US Fidelis gave an entire industry a bad name.

    Just because Enron was filled with crooks, does that mean every energy company in the country is also out to rip-off consumers?

    Lastly, if you consider all extended service contract companies to be scams, why are you making money off of these companies by advertising their websites on your “blog” through Google AdSense? Have you checked out the companies you are advertising? You have 4 of these companies listed above. Get your story straight. Sounds like you’re out to make a quick buck.

    • http://GetOutOfDebt.org Steve Rhode

      Max,

      I did have an extended warranty from the manufacturer that helped me at one time. That was great. The problem in this space is the deceptive marketing that has and is going on, not a valid warranty product. It is also an area of concern for the Federal Trade Commission.

      And while I did write about US Fidelis, they are not the only ones in trouble. Take Credexx for example.

      Steve

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