CarShield and its administrator, American Auto Shield (AAS), will pay $10 million to settle Federal Trade Commission (FTC) charges over deceptive advertising and telemarketing practices.
The FTC found that many CarShield customers faced unexpected repair costs despite paying up to $120 per month for vehicle service contracts (VSCs). Celebrity endorsements in CarShield’s ads also allegedly made false claims about the benefits of the service plans.
The settlement bars CarShield and AAS from making deceptive statements and requires them to ensure that endorsements are truthful. The order applies to NRRM LLC, the Missouri-based company under which CarShield operates, and AAS, which is based in Colorado.
The FTC’s investigation revealed that CarShield’s ads misleadingly suggested that all repairs, including those to major systems like engines and transmissions, would be covered. However, many consumers found their claims denied due to numerous exclusions in the VSCs. In addition, promises of rental cars and the ability to use any repair facility often went unfulfilled.
The $10 million settlement will be used to refund affected consumers. CarShield’s general counsel, Michael Carter, stated that the company disagreed with many of the FTC’s claims but is committed to transparency.
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