19 , 2010
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
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
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.
12 , 2010
Group Gets 'A' Rating From Better Business Bureau?
Consumer Watchdog Accused of Running 'Pay for Play' Scheme With
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
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"
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.
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.
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
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
"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
"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
"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
ways to save money on car repairs
Downey, Boston Globe
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.
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:
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.
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.
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
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?
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.
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.
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
– 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).
– 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
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
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?
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.
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.
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
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.
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:
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.
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.
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.
a simple question: "What's this industry called?"
it's not such a simple answer.
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.
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."
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.
Warranty Search Terms on Google
Number of Pages Found
January 21, 2010
vehicle service contract
vehicle service agreement
breakdown protection plan
contracts for vehicles
extended service contract
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.
Warranty Search Terms on Google
Number of Pages Found
January 21, 2010
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."
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.
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.
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.
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.
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.
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
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.
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."
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.
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,
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."
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.
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.
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.
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."
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.
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."
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
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
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."
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."
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."
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
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.
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
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
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.
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.
just a different way that they file the program with a state's Department
of Insurance," he said.
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.
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.
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."
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
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.
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.
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.
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.
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
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.
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
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.
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.
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
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.
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."
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.
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.
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.
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.
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.
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."
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.
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.
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
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.
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."
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
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.
December 29, 2009
more layoffs, US Fidelis stops selling service contracts
Hathaway, St. Louis Post-Dispatch
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.
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.
company has blamed its dramatic collapse on the economy and what
it considers to be unfair criticisms from consumer groups and the
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.
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.”
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.
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.”
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.”
is the company statement in full:
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.
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.
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
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.
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.
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
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.
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.
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."
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.
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.
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.”
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.
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
Standards of Conduct are available to view at: VPA
Standards of Conduct
Protection Association Approves Industry Standards
of industry standards defines a code of conduct for automotive service
contract industry that will protect the best interests of the consumers.
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.
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.
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."
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.
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."
the Vehicle Protection Association
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.
Auto Protection Leads the Way in Compliance
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.
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.
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.”
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
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.
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.
federal government requires that car makers provide extended warranty
coverage on emission systems.
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.
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
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.
advice to the buyer: Read your warranty agreement carefully, fulfill
your part, and then you can expect the manufacturer to fulfill their
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
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
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
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
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
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
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.
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!
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
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.
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.
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.
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.
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
August 25, 2008
AA Auto Warranty
Joins the Automotive Warranty Services Association
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).
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.
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:
to be subject to unfair, deceptive, abusive, or high pressure
information presented in a clear and understandable manner.
written disclosure of all details associated with a warranty
professional, and accurate responses to all product questions
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.
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
June 25, 2008
Extended Auto Warranties
Help Consumers Control Expenses
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.
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
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.
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 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.”
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.”
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
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.
May 30, 2008
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
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:
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.
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
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.
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.
May 26, 2008
Car Loan Delinquencies
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
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
"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.
May 15, 2008
Let the Buyer
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.
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.
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.
for this article:
April 11, 2008
Extended Vehicle Warranties: Knowing a Good Investment From a
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?
the Missouri Attorney General’s website, the companies being sued
engaged in the following practices:
mailings to customers which mislead them into thinking that
their warranties will soon expire.
themselves as agents of the vehicle manufacturer.
to cover the components that are agreed to be covered.
to tell customers about certain requirements of the warranty
necessary for the warranty to pay claims.
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.
companies being sued are:
Auto Warranty Services (“Dealer Services”)
Auto Warranty Services
Protection Direct (TXEN Partners)
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
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.
April 3, 2008
Would You Like Some Risk with Your Warranty?
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
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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