CarShield, a company selling vehicle service contracts that claim to cover the cost of certain repairs, has agreed to pay $10 million in a lawsuit settlement with federal regulators over charges that its marketing tactics were deceptive and confusing.
In a statement, the Federal Trade Commission (FTC) said that CarShield employed celebrities as sponsors, including rapper and actor Ice-T and sports commentator Chris Berman, to lure customers with promises of “peace of mind” and “protection” against the cost and inconvenience of vehicle breakdowns through its contracts.
Accusations and Misleading Advertisements
The FTC also accused American Auto Shield, LLC (AAS), the administrator of CarShield’s vehicle service contracts, of being involved in the scheme. The agency confirmed that at least one advertisement, aired 18,000 times on television, stated: “With CarShield administrators, you ensure you don’t have to face costly auto repair bills like this.” It also promoted CarShield contracts as “your best line of defense against costly breakdowns.”
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Customers’ Disappointments and FTC’s Statement
However, many buyers discovered that their repairs were not covered, despite paying up to $120 per month for CarShield’s product, the FTC said. “Instead of offering the ‘peace of mind’ promised by their ads, CarShield left many consumers with a financial headache,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in a statement.
“Even worse, CarShield used trusted personalities to deliver their empty promises,” Levine added. “The FTC will hold advertisers accountable for using false or misleading claims to exploit consumers’ financial concerns.”
CarShield’s Response and Improvements
In a statement, CarShield said that while it disagreed with “many” of the FTC’s claims, it shares the agency’s “commitment to helping customers fully understand what we offer and the value we provide.”
CarShield also mentioned that its marketing efforts now include extra details about what a typical auto repair covers and that complete plans can now be “easily viewed before making a purchase decision.” They noted the addition of their Shield repair network, “adding over 10,000 preferred auto repair shops and a concierge system to help customers quickly find a convenient repair center.”
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Mixed Customer Reviews and Understanding Class Action Lawsuits
CarShield, based in Missouri, holds an A+ rating from the Better Business Bureau (BBB), but its BBB listing includes over 300 pages of complaints and a customer rating of 1.6 out of 5.
According to a recent report by WDAF-TV in Kansas City, Missouri, CarShield filed a lawsuit against the BBB, which was settled out of court. American Auto Shield, based in Colorado, also has a customer rating of 2.9 despite an official A+ rating from the BBB.
What is a Class Action Lawsuit?
A class action lawsuit is a civil lawsuit filed on behalf of a group of individuals or business entities who have suffered common injuries due to the conduct of the defendants, with at least one person or entity acting as a representative of the group.
While the issues in a class action may vary, the matters in dispute are common to all group members. Class actions can be filed in state or federal courts, with federal courts being the appropriate jurisdiction if the case involves federal laws.
