The FTC has given three companies lifetime bans from the extended automobile warranty industry and imposed a penalty of $6.5 million. The Southern District Court of Florida, where the companies were based, has approved the FTC’s settlement following and alleged telemarketing scam.
Telemarketing Scam
The telemarketing scam violated the FTC Act as well as the Telemarketing Sales Rule in numerous ways.
- Calling consumers on the Do Not Call Registry
- Attempting to sell extended warranties
- Making misrepresentations such as:
- Claiming they were affiliated with certain vehicle manufacturers
- Stating their warranty provided “bumper to bumper” or “full vehicle” coverage for prices ranging from $2,800 to $3,400
- Advising consumers they could get a full refund with no conditions or restrictions if it was requested within 30 days of purchasing or receiving the warranty.
The FTC found that the companies had no affiliations with any manufacturers, refunds were not provided as promised and the warranties had major restrictions and exemptions that were not made clear.
Outcome
The companies have been given a lifetime ban from:
- In the extended warranty and vehicle service industry:
- Advertising
- Marketing
- Promoting
- Offering sales of/Selling
- Assisting others in any of the above
- Initiating or assisting others in initiating outbound telephone calls
The companies have also been permanently restrained from not provided customer information to the FTC when requested. Moreover, they are not allowed to disclose, use or benefit from any customer information they obtained.
Together the companies were also fined a total of $6,500,000. Additionally, the companies will need to submit a compliance report one year after the entry of the FTC Order. This report must outline the companies’ activities, what goods or services are offered and how they advertise, market and sell. They will also need to disclose any involvement with either of the other companies involved.
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