NRRM, LLC, which does business as CarShield, along with American Auto Shield, LLC, the administrator of its vehicle service contracts, will pay $10 million to settle Federal Trade Commission charges that its advertisements and telemarketing for the contracts are deceptive and misleading, and that many purchasers found that many repairs were not “covered,” despite making payments of up to $120 per month. The FTC also alleges CarShield’s celebrity and consumer endorsers made false statements in its ads.

The stipulated order settling the Commission’s complaint also bars CarShield and AAS from making deceptive and misleading statements in the future and requires them to ensure their endorsers’ testimonials are truthful, accurate, and not deceptive.

“For many consumers, a personal vehicle is one of their most valuable assets and a vital lifeline for getting to work, taking their kids to school, and obtaining medical care. Instead of delivering the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Worse still, CarShield used trusted personalities to deliver its empty promises. The FTC will hold advertisers accountable for using false or deceptive claims to exploit consumers’ financial anxieties.”

NRRM is a Missouri-based company that advertises contracts to consumers throughout the United Sates. AAS, based in Lakewood, Colorado, designs and administers the contracts.

According to the FTC’s complaint, CarShield advertises and sells contracts costing approximately $80 to $120 a month. CarShield’s ads for VSCs often feature celebrities such as sports commentator Chris Berman and actor Ice-T. These endorsers try to assure consumers that buying a CarShield service plan will provide them with “peace of mind” and “protection” from the cost and inconvenience of vehicle breakdowns, which will inevitably occur.

The complaint alleges that many ads claim that all repairs or repairs to “covered” systems, such as the engine and transmission, will be covered and use language that makes consumers believe CarShield will pay for all necessary repairs. For example, one ad that ran 18,000 times on television stated, “With CarShield’s administrators, they make sure you don’t get stuck with expensive car repair bills like this.” It also touts CarShield contracts as “your best line of defense against expensive breakdowns.”

The company sells its plans using telemarketers who answer inbound calls and make outbound calls responding to consumers, including those who made web inquiries. Using scripted statements written by CarShield and cleared by AAS, the telemarketers pitch the contracts and tell consumers that, whether they use a dealer or local mechanic for the repair work, “there is just a $100 deductible for any covered repair.” 

However, consumers do not always get what they think they bought when signing up for the contracts. Instead, the complaint alleges that CarShield’s ads deceptively represent that: 1) all repairs or repairs to “covered” vehicle systems will be paid for under the plans; 2) consumers will receive a rental car at no cost when their car breaks down; and 3) consumers can use the repair facility of their choice for repairs.

Specifically, many consumers could not use the repair facility of their choice, as many do not accept the contracts. Many consumers also find that repairs they thought were covered are not. In fact, none of CarShield’s VSCs covers all repairs or even repairs to “covered” vehicle systems. Instead, the plans contain myriad exclusions. Consumers with denied claims receive no rental car, while many consumers with “approved” claims must pay a portion of their rental car costs.

Finally, the order imposes a $10 million monetary judgment against CarShield and AAS, which will be used to provide refunds to defrauded consumers. The full amount of the judgment must be paid to the FTC within seven days of when the court enters the order.