Remember those annoying robocalls from telemarketers “warning” consumers about supposedly expiring car warranties? It seems like everyone received one last year. Fortunately, the Federal Trade Commission and state attorneys general investigated and cracked down on the ringleaders behind the scam.
In many cases, when authorities arrest those responsible for scams, they are unable to recover much in the way of assets from these criminals. For example, in this robocall scam, the FTC’s proposed settlement of $24 million was suspended because of the defendant’s inability to pay.
Fortunately, not all of the scammers responsible for the auto warranty scams have been able to escape paying up. Earlier this year, the FTC collected more than $655,000 from two of the defendants. On August 23, the agency announced that Damian Kohlfield, another of the fraudsters, will pay approximately $2.3 million in fines related to the scam. In addition, Kohlfield will be required to give up his Mercedes-Benz automobile in what must be delicious irony for victims of the auto warranty scam. All told, the agency will be able to use fines from this scam to reimburse consumers nearly $3 million.
The FTC also has a helpful fact sheet to help consumers avoid auto warranty scams and learn the differences between warranties and service contracts here. For a full listing of all FTC actions taken since last year against these robocallers, click here.
Consumers should also be on the lookout for auto dealerships that claim you must buy a warranty in order for your financing to be approved. Also be wary of salesmen who claim that if you don’t buy an extended warranty when you purchase a vehicle, you won’t be able to buy a warranty int he future. Be sure not to pay for a warranty until you see the full details in writing. Also be sure to check out the dealership and warranty company’s records with the Better Business Bureau before purchasing the warranty.
In general, be very cautious of salesmen who want to sell you “extended” warranties. These warranties are almost always pure profit for dealers. Newer automobiles today are much more reliables that older cars. A Consumer Reports survey in December 2007 found that only 22 percent of consumers surveyed saved any money by using their costly extended warranties instead of simply paying for car repairs out of pocket.