A Push To Curb Auto Service Contract Scams

Aug 31, 2011
Originally published on September 1, 2011 5:34 am

You've likely seen the commercials for vehicle service contracts on TV promising to save customers thousands of dollars in repairs to their older cars and trucks.

And St. Louis is like the Silicon Valley of those vehicle service contract companies. But while the industry continues to thrive, Missouri's Better Business Bureau logged almost 1,000 complaints about it last year alone.

One of the largest companies based there, US Fidelis, sold more than 400,000 contracts across the country until it collapsed in 2009 amid allegations of fraud that eventually led to a bankruptcy filing.

The company's two owners already have surrendered millions of dollars, putting their mansions, yachts and even jewelry up for sale. They face more than a dozen criminal charges in Missouri.

But that doesn't mean the industry has gone away. At the Better Business Bureau in St. Louis, CEO Michelle Corey says with US Fidelis gone, other companies are now marketing more aggressively.

She says her office has gotten complaints about 24 St. Louis-area based auto service contract companies in just the past year.

One, called Stop Repair Bills, racked up more than 180 complaints from consumers, who Corey says often felt tricked by the company.

"Bumper-to-bumper coverage, no questions asked, that's the impression they received, but that wasn't the case," she says. "Many consumers told us that as soon as they tried to use the service contract, that's when they were denied coverage."

A Total Scam?

At Pernell Beasley's home, there's little time to be without a vehicle. He's in school, his wife works nights as a nurse, and they have two small children. So when he saw a TV ad for Stop Repair Bills, he thought it would be a good plan for his 2002 Dodge Ram.

"I'm not a mechanic, so I need that type of sound mind knowing that my vehicle will be covered," he says. "But what happened after the initial file was claimed — it was horrific."

When Beasley's truck engine went out, he says Stop Repair Bills stalled. He went around and around with the company until he finally threatened to call the Missouri attorney general.

Beasley says it took five months to get a new engine for this truck, but he was out $3,000 between the cost of the contract and a car rental.

"I wouldn't recommend this to anyone," he says. "I think it's a total scam, a total scam."

Stop Repair Bills did not return phone calls seeking comment, but the company is a member of the Vehicle Protection Association, a trade group formed in 2008 to try to clean up the industry's practices.

Keeping An Eye Out

"The companies have changed the way they do business," says Larry Hecker, the association's executive director. He says the association has set standards for marketing service contracts and created a certification process.

Hecker says its 11 certified companies, including Stop Repair Bills, are now getting fewer complaints.

"They follow the standards that we have, they follow the laws in various states," he says. "And we have auditors, actually, who check that as part of the certification program and monitor them regularly."

Missouri Attorney General Chris Koster says he's also keeping a close eye on this industry. He pushed for new regulations in Missouri that will go into effect next year and has filed dozens of civil lawsuits.

"Other companies recognize that we're going to bring integrity back to this industry, and if we have to do it in court, we will," he says.

While the criminal trial for US Fidelis' owners has yet to be set, the attorney general hopes that for unscrupulous auto service contract marketers, it might be the best deterrent of all.

STEVE INSKEEP, Host:

Maria Altman with St. Louis Public Radio's has more.

MARIA ALTMAN: Unidentified Man: Stop your auto repair bills now. Next time your car needs repair why get stuck with the bill?

(SOUNDBITE OF COMMERCIAL)

ALTMAN: At the Better Business Bureau in St. Louis, CEO Michele Corey says with U.S. Fidelis gone, other companies are now marketing more aggressively. She says her office has gotten complaints about 24 St. Louis-area based auto service contract companies in just the last year. One, called Stop Repair Bills, racked up more than 180 complaints from consumers, who Corey says, often felt tricked by the company.

MICHELE COREY: Bumper-to-bumper coverage and no questions asked, that's the impression they received. But that wasn't the case. You know, many consumers told us that as soon as they tried to use the service contract, that's when they were denied coverage.

ALTMAN: At Pernell Beasley's home there's little time to be without a vehicle. He's in school; his wife works nights as a nurse; and they've got two small children. So when he saw a TV ad for Stop Repair Bills, he thought it would be a good plan for his 2002 Dodge Ram.

PERNELL BEASLEY: I'm not a mechanic, so I need that type of sound mind, knowing that my vehicle will be covered. But what happened once the initial file was claimed, it was horrific.

ALTMAN: When Beasley's truck engine went out, he says Stop Repair Bills stalled. He went around and around with the company until he finally threatened to call the Missouri attorney general. Beasley says it took five months to get a new engine for this truck, but he was out $3,000 between the cost of the contract and a car rental.

BEASLEY: So I wouldn't recommend this to anybody. I think that it's a total scam, a total scam.

ALTMAN: Stop Repair Bills did not return phone calls seeking comment, but the company is a member of the Vehicle Protection Association, a trade group formed in 2008 to try to clean up the industry's practices.

LARRY HECKER: The companies have changed the way they do business.

ALTMAN: Larry Hecker is VPA's executive director. He says the association has set standards for marketing service contracts and created a certification process. Hecker says their 11 certified companies, including Stop Repair Bills, are now getting fewer complaints.

HECKER: They follow the standards that we have; they follow the laws in their states. And we have auditors, actually, who check that as part of the certification program and monitor them regularly.

ALTMAN: Missouri Attorney General Chris Koster says he's also keeping a close eye on this industry. He pushed for new regulations in Missouri that will go into effect next year and has filed dozens of civil lawsuits.

CHRIS KOSTER: Other companies now recognize that we are going to bring integrity back to the industry, and if we have to do it in court, we will.

ALTMAN: For NPR News, I'm Maria Altman in St. Louis. Transcript provided by NPR, Copyright NPR.