Scammers turning to auto warranties for profit

Several consumers have fallen prey to businesses that claim to offer automobile manufacturer’s warranties but in fact are selling shoddy service plans, according to data from the Better Business Bureau.

Uncertainty in the American automobile industry has opened the way for some businesses to use questionable practices to lure residents into unfair service contracts that have nothing to do with their car’s original factory warranties, Kathy Graham, CEO of the BBB of Coastal Carolina Inc., said.

It’s possible some companies that offer service contracts may be targeting Chrysler and GM customers — even claiming to be affiliated with these companies when they really aren’t, she said.

According to BBB research, the consumer actually is being sold a separate extended service contract that isn’t associated with the car manufacturer’s warranty.

“When the economy is down, these people just come out of the woodwork,” Graham said. “I mean, they want to take people’s last dollar.”

Telemarketers call and claim a warranty has or is about to expire, she said. They then put pressure on the car owner to renew or extend the warranty.

Unfortunately, older residents often give in to these scare tactics, Graham said.

“Seniors seemed to be the ones that fall for it,” she said. “They use their fear tactics, and they scare the seniors into thinking they aren’t going to be safe driving down the road because their warranty is no good. The BBB would tell you that’s the first read flag.”

Whenever a salesperson tries to rush you into doing something, it’s usually a good idea to take your time, she said.

These offers aren’t always presented by phone, but also by mail, Graham said.

“They send postcards (and) some of them look just downright scary,” she said. “They say, ‘Respond now, your warranty expires in 10 days.’ Again, they put the rush on it.”

This year, the BBB has seen a increase in the number of complaints and inquiries from consumers who have received information in the mail or phone calls from telemarketers in reference to their car warranties. Complaints against auto warranty processing services increased about 40 percent in one year, Graham said.

In 2008, more than 140,000 people across the nation contacted the BBB to question how legitimate these companies were, she said.

“As an outgrowth of our country’s economic troubles and, to some extent, problems in the auto industry, the BBB is hearing from consumers nationwide who are being bombarded by telemarketers and mailers trying to scare them into thinking their auto warranty is about to expire,” she said. “Not only are these telemarketers lying about the consumer’s coverage, they are potentially ignoring federal laws, such as the Do-Not-Call registry.”

Those who do sign up for these contracts often find the agreements are unfair, Graham said.

“They’ll find that there are so many provisions that the coverage is useless,” she said. ” For instance, anything pre-existing isn’t covered, you may have to provide maintenance records and they may restrict the facilities where you go (for service.) They are virtually worthless.”

If a person does receive a telemarketing call,  he or she should never give the caller Social Security, bank or credit card numbers. If a consumer is interested in buying a service contract, he or she should request a copy of the contract that explains all terms and conditions before signing up for the offer, Graham said.

Car owners should be familiar with their auto manufacturer’s warranty to ensure they aren’t purchasing overlapping coverage. Consumers also can research the service contract at http://www.bbb.org.

— Staff writer Jamie Rogers can be reached at (843) 317-7266.