The Better Business Bureau is warning consumers of "worthless service contracts" sold with vehicles, which often do not cover many repairs, but are sold as a pretense to save money on auto repairs.
A BBB study shows that consumers have filed thousands of complaints about the vehicle service contract industry after US Fidelis filed bankruptcy. Companies market these contracts as "extended warranties," the BBB says, but often, many repairs are excluded.
"Consumers have been frightened and tricked into parting with thousands of dollars by misleading solicitations and high-pressure sales tactics," said Kim States, BBB President. "Many in the industry have preyed on the elderly and other unsophisticated buyers who believed they were getting warranties sanctioned by auto manufacturers. What most of them got was a worthless piece of paper."
Some states are enacting tougher regulations on this industry, and a federal law has put an end to robo-call solicitations for these contracts, the BBB says. These laws, along with the prosecution of some offenders, "may herald a new beginning in the industry," according to the BBB study.
A survey of consumers revaled that 92 percent of respondents felt the company's tactics for selling contracts were misleading or improper. Ninty-three percent of consumers surveyed said the companies refused to accept claims that the consumers thought were covered, and that consumers spent average of $1,480 on "covered" repairs.
The BBB offers the following advice for prospective car-buyers who are considering these service contracts:
• Always read the contract carefully before agreeing to buy it. See what is covered, what isn't covered and what conditions apply. If the seller won't provide a contract, don't buy it.
• If you are on a do-not-call list, report any violations to the attorney general's office or FTC.
• Do the arithmetic. Sometimes the cost of a contract may be more than the car's value.
• Ask the seller the names and locations of the providers, administrators and insurers. Ask how claims are processed.
A BBB study shows that consumers have filed thousands of complaints about the vehicle service contract industry after US Fidelis filed bankruptcy. Companies market these contracts as "extended warranties," the BBB says, but often, many repairs are excluded.
"Consumers have been frightened and tricked into parting with thousands of dollars by misleading solicitations and high-pressure sales tactics," said Kim States, BBB President. "Many in the industry have preyed on the elderly and other unsophisticated buyers who believed they were getting warranties sanctioned by auto manufacturers. What most of them got was a worthless piece of paper."
Some states are enacting tougher regulations on this industry, and a federal law has put an end to robo-call solicitations for these contracts, the BBB says. These laws, along with the prosecution of some offenders, "may herald a new beginning in the industry," according to the BBB study.
The BBB offers the following advice for prospective car-buyers who are considering these service contracts:
• Always read the contract carefully before agreeing to buy it. See what is covered, what isn't covered and what conditions apply. If the seller won't provide a contract, don't buy it.
• If you are on a do-not-call list, report any violations to the attorney general's office or FTC.
• Do the arithmetic. Sometimes the cost of a contract may be more than the car's value.
• Ask the seller the names and locations of the providers, administrators and insurers. Ask how claims are processed.
