Auto warranty firms launch sleazy scam

Herb Weisbaum • Profile • E-mail

One of the most obnoxious and deceptive marketing campaigns I have ever seen is taking place right now. It uses postcards, letters, and phone calls to sell outrageously priced extended warranties.

The mailings look like an important notice from your car dealer or automaker. There is always an eye-catching warning on the front of the card, such as: “Final Notice: Expiring Auto Warranty.”

Marla Wolfe gets a couple postcards a week telling her she needs to renew her car warranty. “I bought my car without an extra warranty,” she tells me, “so there’s nothing to renew.”

The postcards are annoying enough. Now there are constant phone calls trying to sell her an extended warranty. Wolfe received five calls in one day.

“It’s out of control,” she says. “It’s constant. It’s non-stop. I don’t know what to do. I don’t want their product. I don’t want to be scammed into whatever they’re trying to sell. If this keeps up I’ll go insane.”

Gari Weinraub’s phone number is on the national Do Not Call Registry. And yet, she gets at least one of these warranty calls a day. Weinraub knows the warranty on her 1990 Honda isn’t about to expire. It did that a long time ago.

Even worse, these sales calls are on her cell phone, a number she considers so private only family and a few friends have it. Federal regulations prohibit sales calls like these to cell phones.

Do you need the coverage? Consumer Reports does not recommend buying an extended warranty unless you plan on keeping a trouble-prone vehicle for an extended time after the original warranty runs out. Most manufacturer warranties are sufficient, with bumper-to-bumper coverage of at least three years or 36,000 miles and powertrain coverage that’s often longer. If you want an extended warranty, ones offered by the auto manufacturer are typically better than those offered by third-party companies. Some disreputable dealers may tell you that you must buy an extended warranty because the bank requires it. In fact, lenders typically don’t require it, and making you pay for one under these pretenses is illegal in some states.

“I hate it,” Weinraub says. “It’s an invasion of my privacy.”

These sales calls are going out at all hours of the day and night. I have spoken to a number of people who had their phones ring at 4 a.m., a clear violation of federal regulations that prohibit sales calls before 8:00 a.m. local time.

Complaints pour in
The bulk of the companies doing this are located near St. Louis. The Better Business Bureau of Eastern Missouri and Southern Illinois lists 92 extended warranty companies in that area. They are responsible for a huge number of complaints from across the country.

Many of the complaints deal with deceptive advertising and high-pressure sales tactics. Unhappy customers say they could not cancel and get a refund as the salesperson promised on the phone.

Some people who buy the warranty find that they have problems using it. According to Chris Thetford with the St. Louis BBB, potential customers are told their extended warranty covers all kinds of repairs. “In fact,” he says, “a very, very limited range of things are covered.”

Missouri Attorney General Jay Nixon is now investigating many of the companies selling these warranties in his state. We should know in a few weeks if his office decides to take any legal action.

ConsumerMan’s undercover call
I have received a bunch of these warranty expiration notices, so I decided to respond to one from Vehicle Services in St. Peters, Mo.  I gave the salesman, Corey, my real name and valid information about my car.

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