News Releases

November 19 , 2010

The Better Business Bureau's Grading System Questioned

ABC News's investigation into the Better Business Bureau's questionable grading system made headlines in the wake of its report. Businesses throughout the nation are coming forward with stories about mistreatment and unfair handling by the BBB. With the BBB's reputation as an objective consumer advocacy organization tarnished, consumers may be wondering who they can now turn to for fair information.

ABC News's investigation into the Better Business Bureau's questionable grading system made headlines in the wake of its report. Business throughout the nation are coming forward with stories about mistreatment and unfair handling by the BBB. With the BBB's reputation as an objective consumer advocacy organization tarnished, consumers may be wondering who they can now turn to for fair information.

From investigations by ABC News, the Los Angeles Times, and other media outlets, it has been revealed that companies who pay the BBB for annual membership receive higher grades than nonmember companies. Further, companies that pay the substantial fee for "accreditation" have their grade raised by two levels. A consumer who thinks that they are doing business with a B-rated company would never know that the company's grade would be two places lower had it not paid for BBB accreditation.

Governor-elect Richard Blumenthal, when he was attorney general of Connecticut, was among those who investigated the BBB's practices. His research exposed, among other things, that "points" that raise a member company's grade were unavailable to companies that opted not to pay the membership fee.

Critics are asking how the BBB rating system differs from a typical pay for play scheme. "If you get rewarded solely for paying money and not for how you're running your business, that's pay for play," said Richard McLaughlin, a reputation management consultant. He added, "This is going to hurt the BBB's credibility. Their motto is 'Start with trust,' but to businesses they've apparently been saying 'Start with a check.'"

The concern expressed by investigators and by other consumer advocacy groups is that when consumers consult the BBB, they expect to get objective information. "When consumers go to the BBB and see a company's grade, or see a company without a grade or with a low grade, now we can't be so sure what that means exactly," said R.S. Ramachandran, a consultant for the auto warranty industry. Said Ramachandran, "Did the company get a low grade because they don't do a good job, or because they didn't pay the BBB enough money? Who can say now?"

Certain BBB practices, such as apparently discriminating against certain industries, are likely to be investigated. In the wake of the US Fidelis scandal, the BBB added an option for "auto warranty companies" to their main phone menu. The BBB ratings criteria provide that the final grade is influenced partly by the industry to which a given company belongs. Extended auto warranty companies are therefore likely to given lower grades because the BBB has received a large number of complaints about such companies.

In order to protect themselves from low BBB grades, some companies are choosing to join the BBB rather than to fight it. Jason Goldsmith, CEO of Carchex, a company that sells auto warranties among other services, was just elected to the board of his local BBB chapter. That kind of close relationship between scrutinized business and the BBB can be eye-opening to consumers.

As media outlets and government officials at various levels explore the accusations of "pay for play" further, more investigations of the BBB grading system are expected. AA Auto Protection CEO Daniel Rorapaugh said, "Most companies don't mind being held accountable or being judged, as long as they know the rules, and as long as its their performance that matters, not how much they pay the judge

As a result of disagreement with the BBB's treatment, many companies are dropping their BBB membership, or choosing to remain nonmembers. Jacob Allemagne, who operates a small auto parts store, said "I don't want to be graded by how much I pay the BBB, and that's what it's all about. I do right by my clients, and I have a reputation that proves it."

Companies that have chosen not to join the BBB feel vindicated by the recent exposure of the BBB's practices. Alex Weinstein, who runs a landscaping company, said "Sometimes customers would ask me why I'm not a member of the BBB. I would just say 'Why should I be? I've been in business for 10 years, doesn't that tell you something about how I treat my customers. I don't need to buy a reputation."

Just yesterday, the BBB announced that it would be making changes to their evaluation system, which critics may feel address some concerns. Whether consumers agree only time will tell.

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November 12 , 2010

Terror Group Gets 'A' Rating From Better Business Bureau?
Consumer Watchdog Accused of Running 'Pay for Play' Scheme With Grading System

By:
Jospeh Rhee and Brian Ross - ABC News

The Better Business Bureau, one of the country's best known consumer watchdog groups, is being accused by business owners of running a "pay for play" scheme in which A plus ratings are awarded to those who pay membership fees, and F ratings used to punish those who don't.

To prove the point, a group of Los Angeles business owners paid $425 to the Better Business Bureau and were able to obtain an A minus grade for a non-existent company called Hamas, named after the Middle Eastern terror group.

"Right now, this rating system is really unworthy of consumer trust or confidence," said Connecticut attorney general Richard Blumenthal in an interview to be broadcast as part of an ABC News investigation airing tonight on 20/20.

In an official demand letter sent to the national headquarters of the Better Business Bureau Thursday, Blumenthal called on the BBB to stop using its grading system, which he said was "potentially harmful and misleading" to consumers.

Errors seem to abound at the Better Business Bureau. As reported by an anonymous blogger the BBB also awarded an A minus rating to a non-existent sushi restaurant in Santa Ana, California and an A plus to a skinhead, neo-Nazi web site called Stormfront.

Each listing cost $425.

"They ran the credit card and within 12 hours they were an approved, accredited member," said the anonymous blogger, who runs a site called bbbroundup.com.

"They're more interested in the money than their credibility," he said.

The BBB's Cox said the three listings were all mistakes made by sales people.

"That's an inaccurate statement that business people are able to buy A's," Cox said. "We have more than 500,000 non-accredited businesses who have A ratings," he added.

Better Business Bureau: Pay for Play?
Yet, as part of the ABC News investigation, an ABC News producer with a camera was present as two small business owners in Los Angeles were told by Better Business Bureau tele-marketers that their grades of C could be raised to A plus if they paid $395 membership fees.

Terri Hartman, the manager of a Los Angeles antique fixtures store, Liz's Antique Hardware, was told only a payment could change her grade, based on one old complaint that had already been resolved.

"So, if I don't pay, even though the complaint has been resolved, I still have a C rating?"

Hartman then read off her credit card number and the next business day the C grade was replaced with an A plus, and the one complaint was wiped off the record.

In a second case, Carmen Tellez, the owner of a company that provides clowns for parties was also told she had to pay to fix her C- grade, based on a two-year old complaint that she says had already been resolved.

The C minus became an A plus the very next day after she provided her credit card number for the $395 charge.

Cox said the examples provided by ABC News were violations of sales policy and not a standard way of doing business.

"The BBB is not operating fraudulently," Cox said.

In his demand letter to the BBB, the Connecticut attorney general said, "I am deeply concerned that certain BBB practices threaten its reputation and effectiveness as a reliable resource for consumers."

Allison Southwick, media relations manager for the BBB, said that the BBB had worked with Attorneys Geneal across the country, including Blumenthal, across the country to fight fraud. "We disagree with his characterization that BBB does not adequately disclose the fact that Accredited Businesses financially support BBB," said Southwick. "However, we are always interested in hearing from our partners in consumer advocacy and are pleased to accept constructive feedback from his office and other consumer advocates."

"We have made good progress in working with his office on these issues, and anticipate that we will satisfactorily address his concerns," said Southwick.

Better Business Bureau Grading System
The Better Business Bureau, a non-profit group that began 98 years ago, instituted its A plus through F grading system just two years ago, replacing a "satisfactory/unsatisfactory" ratings system.

Critics say the BBB has used the new grading system as part of an extensive tele-marketing campaign to increase membership and revenue.

An ABC NEWS examination of filings with the federal government revealed that at least 25 of the Better Business Bureau's top officers had salaries in excess of $100,000.

"I think the Better Business Bureau changed course and lost its way by adopting a system of pay to play that maybe enhanced its revenues but also greatly diminished its credibility and honesty," said attorney general Blumenthal, who was elected to the United States Senate from Connecticut last week.

"It's very troubling and it could be illegal because the failure to disclose to consumers could well be deceptive and misleading," he added.

The ABC News investigation found numerous examples of well known companies that are not members of the Better Business Bureau being branded with F grades, often apparently based on scant evidence or a small number of complaints.

The five-star Ritz Carlton Hotel in Boston was given a F rating after only two complaints.

"A million customers served, two complaints resulting in an F rating, seems to be somewhat unusual, to say the least, " hotel general manager Erwin Schinnerl told WCVB-TV in Boston.

Celebrity chef Wolfgang Puck told ABC News that parts of his food and restaurant empire have received an F grade because he refused to pay to join the Better Business Bureau.

"You know, if you become a member, you're sure to get an A, but if you don't pay, it's very difficult to get an A," said Puck, who has been a regular on the ABC News program "Good Morning America" since 1986.

"I think where you have to join an organization to get a good grade is wrong," Puck said.

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June 2, 2010

Nine ways to save money on car repairs

By: Jamie Downey, Boston Globe

I have a deep seated fear of taking my car to the mechanic. My understanding of cars is limited to what I learned in high school in small engine repair. You will be even less impressed with my educational credentials when I tell you that I attended public schools. The fear is a macho thing. I know very little about cars and my biggest fear is that the mechanic starts talking about fuel injectors, brake lines, struts, axles etc. and I do not understand him / her.

That being said, I have learned a few things over the years and have been fortunate enough to keep my car repair costs to a minimum. Here are a few things to keep your car repair bills down:

Preventive maintenance – The old adage “an ounce of prevention is worth a pound of cure” holds very true when it comes to cars. I try to follow the scheduled maintenance plan as outlined in my car owner’s manual. Following this maintenance plan will add years of life to your vehicle and keep it out of the shop. However, there is no need to overdo preventive maintenance. For example, my owner’s manual tells me to change my oil every 5,000 miles. I stick to this plan and do not subscribe to having my oil changed every 3,000 miles that many repair shops tell me to follow. This alone saves about $40 / year.

Honest mechanics – The difference between an honest mechanic and a dishonest mechanic can save you hundreds of dollars each visit to the shop. Once you find a mechanic that you are comfortable with, hold on to them for dear life. If you do not have a mechanic that you work with regularly, ask your friends and family for references. Recently, my car had to pay a visit to my mechanic (MacDonald’s Auto Repair in Canton). After the work was completed, I felt that I was NOT charged enough. It is pretty rare that I want to pay anyone more than the bill, but I feel this way every time I leave their shop. They are just so honest and reasonable.

Clean car exterior regularly – Clean the exterior of your car regularly, especially the undercarriage. The build up of salt, dirt and debris on parts will corrode parts quicker and require more costly repairs. Also dirt and grit gets into joints and helps cause failures.

Dealership vs. local repair shop – Getting repair work done at the dealership is usually a bit pricier than going to a local repair shop. But, the beauty of going to the dealership is that you can be confident that the work will be done correctly. For all complex repair jobs, I take my car to the dealership. Years ago my wife took her car in to have the timing belt changed at a local repair shop. She had to take the car back three times before the repair was done properly (and I will argue the car never really ran the same after that “repair”). Time is money and who has time to deal with that?

Diagnose problems – If your car is not running properly, then diagnose the problem yourself before taking it to the mechanic. There are many websites available in which you can input the symptoms and they will help you assess the problem. These sites will also give you an estimate of the cost to repair the problem. This way, you can speak mechanic when you take the car into the shop and hold them accountable when they estimate the fee.

Tire pressure – Keeping tires properly inflated will add life to your tires and improve the gas mileage of your vehicle. Check your tire pressure regularly. One of the things I like about my car is that it has an automatic indicator to let me know if my tire pressure is low.

Do it yourself – I am neither mechanically inclined nor do I have the time to spend tinkering with my car. About the only task I perform on my car is to lubricate my car door hinges with WD-40 when they start to squeak. However, if you plan to do certain repairs yourself, get the factory repair manual to guide you through the process. This investment will pay for itself in one repair.

AAA – For the nominal annual fee, you can not beat AAA. The member benefits are too great to list here. Additionally, their group rate savings programs will more than offset the annual fee. I save ten percent on my auto insurance through the AAA group rate and always get AAA rates when booking a hotel (this saved me $60 / night on a recent stay).

Warranties – All car warranties are different. Every new car purchased will include a warranty from the manufacturer. Certain used cars also come with a warranties. Review the warranty when you are in need of any repairs and see if the costs are covered. Also, before the warranty expires, have the car inspected and have any qualifying repairs performed.

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Due to new regulatory standards, use of the word "warranty" is to be discontinued and replaced by the phrase "service contract" in the marketing and servicing of what is commonly known as the auto warranty industry. Although we appreciate any attempt to help promote transparency and accountability, it is our contention that eliminating the word “warranty” from such materials will only serve to confuse consumers and open the door to “here today – gone tomorrow” predatory companies which will take advantage of the opportunity and further throw the industry in disarray. The following is an article from our friends over at warrantyweek.com:

January 21, 2010

By: Warranty Week

Vehicle Service Contract Industry:
Consumers seem to prefer the term extended warranty. But industry professionals prefer the term service contract, even when they work for companies with the word warranty in their name. The problem is, there are at least three dozen other terms used to describe the product. Or is it a service? A service product?

As we continue our tour of the extended warranty industry, we've come across a problem regarding the terminology we're using to describe the automotive portion of the business. We thought we knew what to call it, but vehicle service contract turns out to be less popular than we suspected.

Towards the end of last year, we completed a tour of the home warranty section of the industry, acknowledging that the contracts being sold under that title don't actually cover the home. Instead, they cover just the major mechanical systems within the home, such as the boiler, furnace, and air conditioning, and many of the appliances located in the kitchen and laundry room.

The phrase "home warranty" is therefore a bit of a misnomer. Then again, as the great comedian George Carlin once asked, why do Americans drive on the parkway and park in the driveway? But seriously, why try to change the meaning of words and phrases that everyone understands?

As we begin the automotive section of the tour, however, we're finding some organized opposition to the continued use of the term "extended warranty." In last week's newsletter, we recounted how Helen MacMurray, a partner in the law firm of MacMurray, Petersen & Shuster LLP and the legal counsel of the Vehicle Protection Association, had urged the group to take the word warranty out of its name (it was initially called the Automotive Warranty Services Association), and how several VPA members had also removed the word warranty from their product offerings and even their company names.

Banning the Word Warranty?
They weren't merely trying to be less confusing. The VPA's new Standards of Conduct actually bans the use of the terms "warranty" or "extended warranty" to describe the service contracts its members sell. To be specific, the document states 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.

We've always considered product warranties and extended warranties to be different sides of the same coin. One is a free guarantee issued by the manufacturer or seller of a product, which promises to repair any defects that appear within a specified period. The other is a policy sold separately by the manufacturer, retailer, or a third party, which extends the duration of that guarantee for additional years, and/or covers additional perils. Sometimes it also runs concurrently with the product warranty, but promises more convenient service and/or faster turnaround times, or provides some other elevated level of service such as next-day product replacements.

We've always considered extended warranties and service contracts to be nearly interchangeable terms. But what we've discovered upon further inspection is that outside of this thing of ours -- outside of this little cosa nostra of warranty professionals who know the language and speak it fluently -- those terms are not so easily convertible.

It's a simple question: "What's this industry called?"

But it's not such a simple answer.

Industry insiders seem to prefer the term "vehicle service contract" to describe what they sell, at least when they're talking with each other. But in public, at least within the billions of pages archived and organized by the Google search engine, the language they use seems to be quite different.

Tour of Warranty Search Terms
As the table below illustrates, the most popular terms found within the Google universe are "service agreement," "extended warranty," and "service contract," while the most popular automotive-specific terms are "vehicle protection plan," "extended vehicle coverage," and "extended auto warranty."

The term "vehicle service contract" was not among the most popular. In fact, "vehicle service contract" came in 21st on the overall list, and 13th among just the auto-specific terms. It was outranked by "extended car warranty," "car extended warranty," "vehicle extended warranty," and "auto extended warranty," among others. That's a bit unexpected, to say the least.

Extended Warranty Search Terms on Google
Number of Pages Found
January 21, 2010

Search Term Google Pages
service agreement 4,160,000
extended warranty 3,650,000
service contract 3,020,000
maintenance agreement 597,000
after-market warranty 491,000
extended service plan 394,000
vehicle protection plans 326,000
extended vehicle coverage 244,000
extended auto warranty 166,000
vehicle service agreement 164,000
extended vehicle service contract 106,000
car service contract 96,500
vehicle maintenance contract 94,800
extended car warranty 69,200
extended service contract 68,900
vehicle extended warranty 66,200
aftermarket warranty 61,600
car extended warranty 58,600
auto extended warranty 34,700
automobile service contract 24,800
vehicle service contract 23,600
mechanical breakdown insurance 18,600
extended service coverage 15,100
extended vehicle warranty 12,800
auto service contract 6,450
extended automobile warranty 4,420
automotive extended warranty 4,020
motor vehicle service agreement 100
automotive service contract 97
powertrain extended warranty 91
vehicle service protection 70
mechanical breakdown protection plan 54
service contracts for vehicles 39
auto extended service contract 21
automotive service plan 3

Source: Google

Just to be sure that we weren't missing anything, we also ran seven search terms having to do with automotive product warranties. And again, the term most popular within the industry -- product warranty -- was much less popular in the public realm. In fact, product warranty came in dead last.

Product Warranty Search Terms on Google
Number of Pages Found
January 21, 2010

Search Term Google Pages
manufacturer's warranty 2,480,000
factory warranty 1,950,000
bumper-to-bumper warranty 1,870,000
powertrain warranty 1,330,000
car warranty 1,280,000
auto warranty 1,170,000
product warranty 1,040,000

Source: Google

Granted, some of the web pages identified by Google use multiple terms. And some of the counts, such as those tracking "vehicle service agreement" versus just plain "service agreement," are inevitably going to overlap. We didn't try all the possible plurals that also changed their spellings (e.g. warranty vs. warranties). Also, we did not fully investigate all the possible word orders, although we did notice that "extended auto warranty" outscored "auto extended warranty," and that "vehicle extended warranty" outscored "extended vehicle warranty."

Multiple Matches Per Page?
In addition, given the way Google ranks pages, we have to concede that when designing a document, it would be best for a merchant to use as many of the terms as possible, to increase their odds of getting the benefit of a keyword match. Ironically, that probably means that this newsletter will rank very highly on the Google list whenever anybody goes looking for information about the industry -- whatever it's called.

Still, there are some peculiar observations that can be drawn from the data, besides the poor showing of "vehicle service contract." For instance, the hyphenated term "after-market warranty" apparently scored much higher than the compound-worded "aftermarket warranty." On Google, little things like that can mean a lot.

Overall, terms that included the word "vehicle" outscored those that used "auto," "automobile," or "automotive" by a factor of almost four-to-one. But the generic terms that didn't include any words to make them vehicle- auto- or car-specific garnered almost 90% of the total mentions (disregarding the overlap). We expected the automotive "market share" to be higher.

We're really not sure what all this means, or if it really means anything. But it reinforces the idea that there is no single universally supported label for the vehicle service contract industry. However, splice the word auto or vehicle into a term such as service agreement, extended warranty, or service contract, and you probably have something that most people would at least recognize.

The Tour Resumes
So let's take a quick little hyperlink tour of this industry -- whatever it's called -- through the lens of a web browser. Let's see what some of the major players call themselves, their products, and the industry they're in.

Among the industry associations and trade groups, there seems to be a definite consensus around the term "vehicle service contract." The Vehicle Protection Association states that it represents firms in the "automotive service contract" industry, but another page on its web site also touts the benefits of purchasing a "vehicle service contract." Ironically, the only use of the word "warranty" was on a page explaining The difference between a manufacturer’s warranty and a vehicle service contract

The Vehicle Service Contract Administrators Conference and the Service Contract Industry Council are both solidly behind the term "vehicle service contract." After all, they have the words "service contract" in their names. The SCIC, we should note, sometimes switches to the term "service contracts for vehicles," which Google found on only 39 web pages worldwide.

Vehicle Service Contract Supporters
Assurant Solutions, a member of the SCIC, has a business unit called Automotive and Recreational Vehicle Services. The company seems to be rather consistent in its use of a single descriptive term for the product it sells: a "vehicle service contract."

"Working from our standard portfolio or developing customized solutions, we partner with business-to-consumer companies to offer a suite of vehicle service contracts (VSC) for new and preowned automobiles, recreational vehicles, watercraft, motorcycles and all terrain vehicles," states the company's own description of itself.

Jimmy Atkinson, Assurant Solutions' senior vice president of vehicle service contracts, said he fully supports the use of the term "service contracts." Then again, he has those words in his job title, doesn't he?

"Technically what we sell aren't warranties," Atkinson said in an email to Warranty Week, "although it is common for people to refer to them as extended warranties. At Assurant, we use 'vehicle service contract' to describe our business even though some of it is MBI [mechanical breakdown insurance]. We think it catches all the products with motors and wheels or rudders, including autos, RVs, motorcycles, other powersports and marine."

Extended Warranty Veterans
The Warranty Group, though it's changed its name and has had multiple owners over the years, can trace its roots back to 1964, when Pat Ryan & Associates began selling credit insurance through car dealerships. Resource Automotive Inc., part of the Warranty Group, seems to use several terms interchangeably in its marketing materials, including "extended service contracts," "automotive service plans," and "automotive extended warranties." Only the first of those seems to get any love from Google, though more generic terms such as "service contract" and "extended warranty" did score very highly.

Rob Mancuso, senior vice president, corporate communications, at the Warranty Group, said the people he asked within the company preferred the term "service contract," preceded by either the word "vehicle" or "auto." They did not like any of the terms that included the word "warranty," he said.

Mancuso, who himself has been on either the dealer or the underwriter side of the service contract business since 1974, said that describing something as an extension of the manufacturer's warranty just seems to invite trouble.

"The word warranty only applies to the underlying manufacturer's product warranty, which came with the product," he said. "That's what Legal would say to us. If I went in and said, 'We're extending the warranty,' they'd say, 'No, you're not!.' Warranty comes from the manufacturer. It ends, and we're asking, 'Would you like a service contract?' They're two distinctly different elements."

Then again, Mancuso added, consumers will keep on calling them extended warranties, just like they call any facial tissue a Kleenex® or any copy a Xerox®. Nobody calls them electrophotographic copying machines, and nobody will, no matter what the lawyers say.

"We can try to change the world, and the terminology will remain," Mancuso concluded. "But for journalistic and copy-creation purposes, I think we should all stick with service contracts."

A Little Bit of Everything
AMT Warranty Corp., a part of AmTrust Financial Services Inc., describes itself as "administrators of extended service plans (ESP) and warranties." Among the types of service plans listed on a products page are "vehicle service contracts." And on the parent company's European web site, there is an entry on the list of specialty risk products and services entitled "motor vehicle warranty insurance."

Numerous administrators and underwriters seem to use multiple terms rather interchangeably. On a page subtitled, "Driving automotive warranty opportunities," Warrantech Automotive states that it is "a world class provider of vehicle service contracts." But on another page aimed at irate consumers who are looking for someone to blame for all the unwanted phone solicitations they're getting, the company states: "Warrantech makes no outbound sales calls regarding auto extended warranties or auto service contracts." And at the bottom of a press release, when describing itself, the company says, "Warrantech Corporation administers and markets service contracts and after-market warranties on automobiles, automotive components, recreational vehicles, appliances, consumer electronics, homes, computer and computer peripherals for retailers, distributors and manufacturers."

On a page labeled "vehicle service contract information," US Fidelis touts its "affordable vehicle service protection," which is available from "top vehicle service contract providers." On another web site created to "dispel myths" about its business practices, US Fidelis uses the term "extended service contract" and states that it " supports efforts to strengthen vehicle service contract industry standards."

Allstate Dealer Services sells its CarMor brand of "vehicle service agreements." Toyota Financial Services also sells vehicle service agreements. CNA National Warranty Corp. typically uses the term "vehicle service contract," though it's sometimes abbreviated as just plain "service contract."

The Penn Warranty Corp. uses the term "service contracts." Guardian Warranty Corp. uses the term "vehicle protection plan" on its web pages aimed at consumers, but on a page aimed at auto dealers it switches to "service contract" or "mechanical breakdown protection plan."

EasyCare states that it has four extended warranty plans: TotalCare, StatedCare, PrimaryCare, and PowerCare. TotalCare is additionally described as an "extended auto warranty" that provides "extended service coverage."

Adapting the Message to the Listener
Sometimes, what matters less than who's speaking is who's listening. Warranty industry professionals know the terms and what they mean. But most consumers don't. So the trick is to use multiple terms, in a context in which one helps to define the other, so that both groups of listeners know what we're talking about.

Interstate National Dealer Services Inc. has a slogan on its web site, "We warranty the big things in life." Interstate describes itself as "a leading provider of service contract and extended warranty programs," using both terms in sequence to enhance reader comprehension. By the way, we checked, and Google found 97,200 pages that use both terms.

Bill Gilman, Interstate's vice president of direct marketing, said he thinks there's one set of terms that should be used when the listener is an insider working within the industry, and another set of terms that should be used when the listener is a current or prospective customer.

"Within the industry, and my understanding of what they're truly supposed to be referred to as, is a vehicle service contract," he said. "But to the lay person, if you said that to them, they probably wouldn't know what you were talking about. So the term 'extended warranty' usually is preferable." But if he had to choose one, it would be service contract, he said.

Insurance vs. Service Contracts
Then again, there are programs sold in certain states that are called "mechanical breakdown insurance." This, Gilman suggests, is a term that is preferred by insurance companies, banks, and credit unions, and/or it's a term required by state insurance regulators. In other words, it's not so much a function of who's listening as it is who's speaking and where.

"It's just a different way that they file the program with a state's Department of Insurance," he said.

In other words, if it's a regulated financial company doing the selling, they might call it mechanical breakdown insurance. But if it's an auto dealer or a direct marketing company doing the selling, they should call it a vehicle service contract. And if it's being pitched to a consumer, it may help to explain that a vehicle service contract is an extended warranty for a car.

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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.

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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.

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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.

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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.

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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.

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

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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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