Extended Warranty Company CarChex Facing Huge FTC Settlement for Deceptive Practices

Some extended auto warranty and service contract providers have earned a bad rap over the years for deceptive business practices and harassing potential customers. One of the most well-known names in the industry is now facing a significant fine for its deeds. CarShield has agreed to pay $10 million to the Federal Trade Commission over claims that it deceived customers with its advertising.

The FTC’s director of the Bureau of Consumer Protection said, “Instead of delivering the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache. 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.”

Part of the complaint relates to CarShield’s use of Ice-T and Allen Iverson to endorse its products. The FTC said that the company failed to cover the repairs stated in those advertisements and noted that customers were often told they couldn’t get repairs at their chosen shops or get a loaner vehicle. In many cases, customers had to pay thousands for repairs that they were told would be covered.

In addition to the settlement, CarShield is subject to a few restrictions:

• It cannot use deceptive or misleading statements
• It cannot violate the FTC’s telemarketing rules
• It must ensure the people it hires to endorse the products are truthful and accurate

Back in 2021, I used CarChex to cover a 200,000-mile Porsche Cayenne GTS, which almost immediately needed repairs that cost more than I paid. This story is a familiar one for me, because CarChex failed to cover the entirety of a repair that was detailed in my contract. While I didn’t see a reason to sue or pursue other actions, this story and my experience led me to believe these practices are more widespread than anyone knows, even for the most well-known brands.

[Images: AvokadoStudio, tuaindeed via Shutterstock]

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