How to stop telemarketing car warranty calls

Ann Beatty loves her sporty 2002 BMW 325ci.

But it’s no longer covered by a factory warranty and last summer it needed an $840 alternator repair. So when she got a sales call a few weeks later pitching an extended vehicle warranty, it sounded good.

Now Beatty, who lives in Rome, is out more than $2,100 because the warranty’s marketer took her money and went out of business without paying the firm that provides the policy. Although the policy was restored last week as a goodwill gesture by the firm, Georgia insurance regulators opened a criminal investigation.

Beatty encountered two growing problems with such warranties: aggressive, sometimes illegal, marketing practices and failure to provide what the consumer thought she paid for.

Extended auto warranties made news last week as U.S. senators complained about relentless telemarketing calls and the Federal Trade Commission sued three companies it says are behind an aggressive recent wave of “robo-calls” generated by automated dialers that use pre-recorded messages.

The problem has been growing for a year, prompting investigations by attorneys general in about 40 states and lawsuits by consumer protection agencies and cellphone companies.

“Most of the complaints we’ve received are from consumers who have received solicitations that contained deceptive representations, or they’ve received multiple unsolicited phone calls about the extended warranties,” said Shawn Conroy of the Georgia Governor’s Office of Consumer Affairs. “We have several investigations ongoing.” He declined to name the firms.

The uproar over questionable auto warranty sellers has some banding together to protect their good names.

“The better companies, the ones that have been in business for a while, are rather nervous,” said Larry Hecker, executive director of the Automotive Warranty & Service Contract Association.

The new group is developing guidelines for consumers to separate good companies from bad. Hecker said its Web site, www.warrantybestpractices.com, will have information soon.

Tactics that have drawn the ire of consumers, lawmakers and regulators include the indiscriminate use of automated dialers and recorded messages, hitting home, work and cellphones even when they’re listed on the federal “do not call” registry or are off-limits because the numbers are assigned to wireless phones. Federal law makes it illegal to solicit cellphones with automated dialing or pre-recorded messages.

The call volume is staggering.

Verizon Wireless last year sued USfidelis, an extended auto warranty seller then known as National Auto Warranty Services and Dealer Services. The suit alleged the warranty firm’s telemarketer used automated

dialing to make nearly 3 million solicitation calls to Verizon cell phone customers between January and July 2008, court records show.

In just one hour on March 1, 2008, Verizon’s customers were bombarded with 23,743 calls – nearly seven calls per second.

It took Verizon months to identify the culprit because the telemarketer hid its identity using “spoofing” technology, which transmits a fake telephone number to the recipient’s caller ID.

To settle the suit, USfidelis and its telemarketer, Voice Solutions, recently agreed to stop making unsolicited calls to Verizon customers and pay $50,000, which the phone company donated to charity, said Jeffrey Nelson, a Verizon spokesman.

USfidelis officials said the company no longer makes telemarketing calls and is instead advertising on television.

But other companies continue to blast consumers with calls.

Last month Verizon sued two other warranty firms it says have been involved in robo-calls to its customers since February. An attorney for Dealers Warranty LLC, a St. Charles, Mo., firm doing business as Federal Auto Protection, said the company isn’t the source of the calls. An attorney for National Dealers Warranty, based in St. Peters, Mo., said the firm in the past used Voice Solutions for telemarketing and relied on it to follow the law. Voice Solutions officials did not respond to a calls seeking comment.

AT&T Mobility also is trying to stop firms it says have made millions of warranty calls to its customers. In January, the cellphone company sued in federal court in Atlanta, listing defendants as “John Does” because AT&T still is trying to find the companies behind “spoofed” phone numbers.

Robocalls aren’t the only problem. Some consumers complain that after paying hundreds or thousands of dollars, they’ve been unable to get firms to pay for repairs marketers led them to believe would be covered.

The Better Business Bureau issued warnings this spring that it has received more than 1,200 complaints about USfidelis and its products, including that the Wentzville, Mo.-based firm has pressured consumers into buying expensive service contracts “from which they received little or no benefit.”

The Missouri Attorney General’s Office sued USfidelis last year over its sales tactics; the case is pending.

USfidelis spokesman Ken Fields said the number of BBB complaints is small compared to the firm’s 270,000 customers.

Ann Beatty’s warranty problem involved two other firms. North American Warranty Solutions, a Florida marketing firm, called her last summer and sold her what she thought was a straight-forward extended warranty on her BMW.

On Aug. 15, Beatty paid the marketing firm $2,115 for a “Great Choice” extended warranty that would cover her car for 84 months and 100,000 more miles. She got a package in the mail from Consumer Direct Warranty Services with documents detailing the coverage and two little brown tablets — an additive she was supposed to put in her car’s cooling system.

Beatty ignored the tablets and assumed all was well with her policy. Then in February she

got a letter from Consumer

Direct saying her warranty

was canceled due to nonpayment.

Consumer Direct officials said they canceled Beatty’s and other consumers’ warranties after the marketing firm went out of business without forwarding payment. The marketing firm’s phone number has been disconnected and its officials couldn’t be reached for comment.

In March, Beatty called the Georgia insurance department and was referred to the Governor’s Office of Consumer Affairs.

Last week, after Spotlight began reporting, Beatty’s case was sent back to the insurance department. Late Wednesday, Insurance Commissioner John Oxendine said he opened a criminal investigation after reviewing the documents sent to Beatty by Consumer Direct.

“We believe … they have issued a contract of insurance and that they are an unauthorized insurer in the state of Georgia,” Oxendine said. If that’s true, it’s a felony, he said. Firms offering extended warranties or service contracts in Georgia need to be either licensed insurance companies or be backed by insurance companies, he said, and there’s no indication Consumer Direct is either.

Rob Chapman, Consumer Direct’s president and CEO, did not respond to calls and e-mails for comment on the investigation. Denis Kenny, an attorney for the firm, said in an e-mail Thursday he objected to the AJC reporting anything about Oxendine’s investigation because the insurance department hadn’t returned his calls inquiring about it.

During an interview earlier in the week, Chapman said his company would reinstate Beatty’s policy along with those of 55 other consumers who purchased policies through the defunct marketing firm.

Beatty would like her money back, but Chapman says the best he can do is restore her warranty since his firm never got paid.

Oxendine said he suspects Consumer Direct is sending the tablets as a way of skirting insurance regulation, attempting to exploit exemptions in the law for firms that warranty products they manufacture. The tablets, which Consumer Direct makes, can’t possibly provide protection for all auto parts covered by the firm’s contract, Oxendine said.

Where to complain

• Georgia Insurance Department: 404-656-2070 or www.inscomm.state.ga.us

• Governor’s Office of Consumer Affairs: 404-651-8600

• Better Business Bureau: 404-766-0875 or www.bbb.org

• Federal Trade Commission: www.ftc.gov

Stop sales calls

• Put phone numbers on the National Do Not Call Registry. Go to www.donotcall.gov or call 1-888-382-1222 from the number you want to register.

• Report telemarketing calls to that same Web site and phone number.

• Tell your cellphone provider about any telemarketing calls to your wireless number.

Ask before buying

If you’re considering an extended auto warranty, do homework before investing money:

Who is the company you’re dealing with? Are they only a direct marketer that sells warranties? If so, ask for the name of the company that actually administers the warranty or service contract. Are they an insurance company – or do they have an insurance policy to back up their warranty contracts?

Research the reputation of the seller and the warranty firm. Contact the Georgia Insurance Commissioner’s Office, the Georgia Governor’s Office of Consumer Affairs, the Better Business Bureau and local auto dealer associations. Google the company’s name for complaints.

Insist on being given a sample copy of the contract before buying — and read it. Know what’s covered – and what’s not.

Ask whether repairs can be made anywhere. Does it work only at certain repair centers? Do you need prior authorization? Test the company’s authorization line before buying.

Make sure the extended warranty doesn’t duplicate any manufacturer’s warranty that came with the vehicle.

Sources: FTC, BBB and Georgia insurance and consumer protection officials

Update: Debt collectors

The standoff between a Marietta-based debt collection law firm and state consumer regulators is headed back to court this month.

The Governor’s Office of Consumer Affairs has been investigating complaints that Frederick J. Hanna and Associates uses deceptive collection practices. But after the firm refused to answer investigators’ questions and turn over documents, the consumer office took them to court.

Hanna denies any wrongdoing and contends that because it’s a law firm, the consumer office has no jurisdiction over its debt collection tactics. An initial hearing on the jurisdiction question was held in April. Cobb County Superior Court Judge S. Lark Ingram has scheduled another hearing for May 26.

Consumer complaints about the Hanna firm and other debt collectors were featured in a March column. To read it go to: http://tinyurl.com/cf88q5

Got a tip?

Do you suspect a consumer rip-off, government waste or a threat to public safety? Tell us what you want investigated. E-mail spotlight@ajc.com or call 404-526-5041.