Federal, state groups warn consumers about extended auto warranties

Daily Record and the Kansas City Daily News-Press, Apr 15, 2005 by St. Louis Daily Record Staff

The Consumer Fraud Task Force, a joint task force of federal and state law enforcement agencies and the Better Business Bureau, urge consumers to use caution before responding to unsolicited offers for extended auto warranties (auto service contracts), usually via pamphlets in the mail.

Members of the task force said they have noted an increase in consumer complaints and inquiries regarding extended auto warranties, including many offers received by task force members themselves.

In most cases, consumers receive a notification that their auto warranty has expired or is about to expire, and they are given an offer to purchase an additional warranty. Many times the flyer is designed to look like it was sent by the car's manufacturer, when in fact it was sent by and independent warranty company. Many consumers report that they realized this after they signed up for extended coverage and then had difficulty obtaining a refund. Consumers also complained that their original manufacturer's warranty wasn't near expiration.

Consumers should be aware that an auto service contract is a promise to perform or pay for certain repairs or services. While sometimes called an extended warranty, it is not a warranty as defined by federal law.

A service contract may be arranged at any time and always costs extra; a warranty comes with a new car and is included in the original price. The separate and additional cost distinguishes a service contract from a warranty.

While consumers may benefit from the purchase of an extended warranty, they should find the answers to many questions before purchasing it.

These questions include, Who backs the warranty? Warranty claims are often processed by independent companies called administrators that decide whether a claim will be paid off or not.

Consumers should also verify the warranty's coverage. Watch out for absolute exclusions that limit coverage, such as mechanical breakdowns only. Normal wear and tear items and pre-existing problems may not be covered.

In addition, consumers should find out which of their local service centers will honor the warranty and whether they must obtain prior authorization before repairs can be made.

The Task Force previously has focused on work-at-home scams, home remodeling, sweepstakes offers, phishing (online identity theft), online auctions, collection agency tactics and unsolicited checks.

Participating in the Consumer Fraud Task Force are the Missouri Attorney General's Office; Illinois Attorney General's Office; Federal Trade Commission; U.S. Postal Inspection Service; U.S. Attorney's Office, Eastern District of Missouri; U.S. Attorney's Office, Southern District of Illinois; and the BBB serving Eastern Missouri and Southern Illinois.