CarShield, a company that sells vehicle service contracts to automobile owners that it claims will cover the cost of certain repairs, has agreed to pay $10 million in a settlement with federal regulators over charges that its marketing tactics were deceptive and misleading.
In a statement Wednesday, the Federal Trade Commission said CarShield, which employs celebrity endorsers including rapper and actor Ice-T and sports commentator Chris Berman, had falsely lured customers with the promise of "peace of mind" and "protection" from the cost and inconvenience of vehicle breakdowns through its contracts.
The FTC also charged American Auto Shield, LLC (AAS), the administrator of CarShield's vehicle service contracts, in the scheme.
The agency said that at least one ad, which 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." It also touted CarShield contracts as "your best line of defense against expensive breakdowns."
Yet many purchasers discovered that their repairs were not covered, despite making payments of up to $120 per month for CarShield's product, the FTC said.
"Instead of delivering the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache," Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement.
"Worse still, CarShield used trusted personalities to deliver its empty promises," Levine said. "The FTC will hold advertisers accountable for using false or deceptive claims to exploit consumers’ financial anxieties.”
In a statement, CarShield said that while it disagreed with "many" of the FTC's assertions, it shares the agency's "commitment to helping customers fully understand exactly what we provide and the value we offer."
It said that its marketing efforts now include additional details about the elements of typically covered car repair and that full plans are now "easily viewed prior to making a purchase decision."
And it said it had expanded its Shield Repair Network "by adding more than 10,000 preferred car repair shops, and added a concierge system to help customers quickly locate a repair facility convenient for them."
A representative for AAS did not respond to a request for comment.
CarShield, based in Missouri, has an A+ rating from the Better Business Bureau — but the company's BBB listing features more than 300 pages of complaints and a 1.6 out of 5 customer rating. A recent report from WDAF-TV of Kansas City, Missouri, said CarShield had sued the BBB, with the case being settled out of court.
American Auto Shield, based in Colorado, likewise has a 2.9 customer rating despite an official A+ rating from the BBB.
