CarShield Pays $10 Million Fine To Settle Case Of Deceptive Ads On Radio, Other Media.

CarShield, the administrator of its vehicle service contracts, has agreed to pay $10 million to resolve allegations of deceptive advertising on radio and other media brought by the Federal Trade Commission. The FTC’s complaint says CarShield promises in its ads that consumers have “peace of mind” and “protection,” making claims such as “you won’t get stuck with another high repair bill” and “you’ll never pay for expensive car repairs again.” But the FTC says the ads were deceptive and misleading, and that many purchasers found that many repairs were not “covered,” despite making payments of up to $120 per month.

The FTC also alleges that CarShield’s celebrity and consumer endorsers made false statements in its ads. While the celebrity endorsers said they had signed up and used the company’s coverage, in many cases this wasn’t true. They were not “real” customers — and the government also alleged that many CarShield ads deceptively feature consumer endorsers who claim to have saved a specific amount of money using their plans but have not, in fact, saved that amount.

Among those enlisted to endorse CarShield have been sportscaster Chris Berman and actors Ice-T, Vivica A. Fox, Adrienne Janic, and Ernie Hudson, as well as former professional basketball player Allen Iverson; former professional wrestler Ric Flair; and professional baseball players Walker Buehler, Pete Alonso and Matt Vierling.

In addition to agreeing to pay what amounts to a $10 million fine, which will be used to provide refunds to defrauded consumers, CarShield agrees in the proposed order to stop making the misrepresentations described in the complaint. CarShield will also be required to inform third-party marketers of the order, and to review and monitor their advertising and marketing. The order also imposes standard reporting and compliance provision that will remain in place for up to 10 years.

“The FTC will hold advertisers accountable for using false or deceptive claims to exploit consumers’ financial anxieties,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.

The complaint alleges many ads claim that all repairs to “covered” systems, such as the engine and transmission, will be covered and use language that makes consumers believe CarShield will pay for all necessary repairs. For example, one ad that ran 18,000 times on television stated, “With CarShield’s administrators, they make sure you don’t get stuck with expensive car repair bills like this.”

But the FTC says many consumers could not use the repair facility of their choice, as many do not accept the coverage. Many consumers also find that repairs they thought were covered are not. Instead, the plans contain myriad exclusions.

“Instead of delivering the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache,” said Levine. “Worse still, CarShield used trusted personalities to deliver its empty promises,” he said in a statement.

The FTC voted 5-0 in favor of the settlement, which has the force of law when approved and signed by a federal district court judge.

Ari Lazarus, a Consumer Education Specialist at the FTC, tells consumers in a blog post that they should not rely on celebrity endorsements alone. “It’s helpful to look at reviews from a variety of sources, like trusted websites with impartial expert reviews,” he says, adding they should also be on the lookout for fake reviews.