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Auto warranty company barred from NC, AG announces

Release date: 12/23/2010

Service contracts sold by Credexx didn’t live up to the hype, Cooper says

Raleigh: Auto service contract company Credexx and its owner are banned from operating for misrepresenting their products and services to North Carolina car owners, Attorney General Roy Cooper said Thursday.
 
“My office hears frequently from consumers who pay for service contracts that don’t live up to the hype,” Cooper said. “We’re keeping a close eye on these auto service contract sellers to make sure consumers get treated fairly.”
 
This is the second company prohibited from selling or pitching auto service contracts in North Carolina this year. In November, Cooper won an agreement with U.S. Fidelis, formerly the nation's number one seller of car service contracts.
 
Auto service contracts are different from true warranties, which are included in the price of vehicles and offered through the manufacturer. Service contracts are sold separately, usually by third party sellers, for an extra charge. Consumers often pay more than $1,000 for the service contracts.
 
Wake County Superior Court Judge Howard E. Manning this week approved a consent judgment and permanent injunction that bans California based Credexx, Inc., also doing business as Auto One Warranty Specialists, and its owner David J. Tabb from doing business of any kind in North Carolina. The permanent ban applies to Credexx as well as any other business that Tabb owns, operates or manages now or in the future. Tabb is also barred from training anyone or selling materials to anyone to operate a business in the state.
 
If Credexx or Tabb violate the judgment, they will be required to pay $50,000. 
 
Cooper had asked for the order to resolve a case he brought against Credexx and Tabb in April, contending that they misled consumers about the benefits and coverage of service contracts and also failed to provide written contracts to some consumers, disclose key terms and restrictions, and pay refunds when requested. 
 
As alleged in the complaint, Credexx regularly mailed postcards or made telemarketing calls claiming that consumers’ auto warranties were about to expire. When consumers responded, they faced a high-pressure sales pitch. Consumers complained that they either never received a written contract at all, or that the contract had so many exclusions and limitations that they wanted to cancel the service as soon as they read it. However, people who tried to cancel for a refund said it was very difficult and sometimes impossible to do so.
 
Hundreds of consumers complain each year to Cooper’s Consumer Protection Division about auto service contract companies and their illegal telemarketing calls, tricky sales tactics, denial of claims and refusal to pay refunds. A total of 22 consumers filed complaints against Credexx and Auto One Warranty Services. In some cases, the Consumer Protection Division was able to help consumers get their money back.
 
“Don’t let a high-pressure sales pitch convince you to buy a service contract you may not really want or need,” Cooper warned. “Before you agree to pay for any auto service contract, ask for a copy and read it carefully to make sure it lives up to the sellers’ promises.”
 
Keep the following tips in mind to avoid trouble with auto service contracts:
  • Don’t fall for urgent calls or letters warning you that your car warranty is about to expire. Be sure to review your current warranty to see if it’s still active and don’t give in to pressure from salespeople.
  • Read both the manufacturer’s warranty and the service contract carefully. If they cover many of the same parts for the same period of time, you probably don’t need the service contract.  
  • Read the entire contract before you sign or pay any money. Make sure that any verbal promises are put in writing. If the service contract doesn’t say that an item is covered, assume that it is not. 
  • Most extended service contracts have a deductible, meaning you’ll pay a fee for each repair. Be sure to read the contract to determine if you are required to pay upfront for the repair and then wait to be reimbursed.
  • Make sure you are dealing with a reputable seller and are ready to purchase before you give them your bank account or credit card information over the telephone.
 
To check out an auto service contract company or file a complaint, North Carolina consumers can call1-877-5-NO-SCAM toll-free within state. Consumers can also file a complaint online.