The FTC is going after companies behind those annoying auto warranty robocalls

I decided to listen to a pitch. All kinds of promises were made, including that I would have “bumper to bumper” coverage.

Then came the discussion about cost. For the lump-sum price of about $6,000, I could cover my 2006 Honda Odyssey, which is nearing 200,000 miles. I could also pay for the plan in monthly installments, the salesman said.

For that amount of money, I could just fund major repairs myself, I protested.

No problem, the salesman said, lowering the warranty cost to about $5,000. After several price cuts, he finally said he could offer the extended-warranty policy for about $3,000.

This type of telemarketing call is repeated across the country. In some cases, it’s a scam. Or, people pay for a warranty that has so many exclusions, it’s useless, according to the Federal Trade Commission.

This month, the FTC filed a complaint against a Florida-based company, American Vehicle Protection Corp. (AVP), and other defendants alleging they bilked consumers out of more than $6 million over the past four years. The FTC accuses the company of deceptive marketing practices that included misrepresenting to consumers that it was calling on behalf of a dealer or car manufacturer and offering policies that didn’t provide the extensive coverage as promised during calls with consumers. The FTC also said the company violated the law by calling consumers who were on the National Do Not Call Registry.

“Once you look at the fine print, which of course people can’t see when they’re talking on the phone, it is far from a comprehensive warranty,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in an interview. “It is far from bumper-to-bumper coverage. The protections are quite weak.”

The FTC’s complaint says AVP’s extended-warranty prices ranged from $2,800 to $3,400.

In a statement and in its own lawsuit against the FTC, AVP argues not only that the FTC is wrong but also that the agency doesn’t have the authority to pursue relief for consumers. AVP’s lawsuit specifically points to a unanimous decision by the Supreme Court last year that ruled the FTC overstepped by forcing companies engaged in deceptive business practices to provide billions of dollars in monetary relief to consumers.

“While AVP disagrees that it was violating the law, it embarked upon an extensive and unprecedented revamping of its policies and practices to ensure compliance,” according to the statement, emailed by the company’s attorney, Mitchell N. Roth.

Last year, the FTC received more than 427,000 complaints from consumers regarding telemarketing calls for warranty and protection plans, with the vast majority involving extended auto warranty pitches.

Consumers are fed up with the unsolicited, annoying calls and often deceptive letters about extended car warranties.

“We want to send a clear message that blasting consumers with robocalls, selling them bogus bumper-to-bumper warranties is not going to be tolerated by the commission,” Levine said.

In testimony before a Senate subcommittee this month, Levine said that during the course of the pandemic, there’s been a disturbing surge in consumer complaints, with Americans being targeted by predators large and small.

As consumers struggle to cope with covid-related price increases, it’s easy to see how many people look to these extended warranties to help with expensive repair costs for their cars.

Without referring specifically to the AVP case, Levine talked about the gap between what people think is covered when they are talked into buying these plans and what is actually delivered. The FTC has a webpage devoted to the pitfalls of auto warranty policies. (At ftc.gov, search for “Extended Warranties and Service Contracts.”)

Consumers should be aware that sometimes the warranty coverage duplicates protection they already have on their automobiles. Often the contracts will have major exclusions for the most expensive repairs. Normal wear and tear may not be included. The warranty may cover only a portion of repair replacement costs based on mileage.

“We see a number of pitfalls in this space where the claims that are being made over the phone are not backed up with the actual coverage consumers are getting,” Levine said.

My advice: Hang up when you get a call about an extended auto warranty plan. Toss that intimidating letter in the recycling bin. Just save the money you would use to pay for one of these plans, which in the end may save you a lot of aggravation.