Attorney General Gansler Announces $25 Million Order for Consumer Restitution and Penalties against Auto "Warranty" Company
Nation's largest seller of service contracts misled Maryland consumers
MD ( Aug. 4, 2011) - Attorney General Douglas F. Gansler announced today that his Consumer Protection Division has ordered a Missouri corporation, U.S. Fidelis, Inc. and the company's owners, Darain and Cory Atkinson, to cease their deceptive marketing of vehicle service contracts and pay more than $25 million in restitution and penalties. U.S. Fidelis, formerly known as National Auto Warranty Services and Dealer Services, had been the largest seller of vehicle service contracts in the country.
"U.S. Fidelis misled thousands of Marylanders by promising warranties that it could not offer," said Attorney General Gansler. "Businesses that sell vehicle service contracts need to be truthful and upfront about the coverage they are offering so consumers can make informed decisions whether to purchase the policies."
From 2005 to 2010, U.S. Fidelis sold "extended vehicle warranties" to almost 17,000 Marylanders promising to extend existing manufacturers' warranties and provide "bumper to bumper" repair coverage. Typically, the company would either call consumers or send them mailings informing them that their existing manufacturer's warranty was about to expire and offering consumers an opportunity to extend the warranty. Consumers who responded to the advertisements were subjected to high-pressure sales presentations.
In July 2010, the Division charged the company and its owners with violating the Maryland Consumer Protection Act and Telephone Solicitations Act by, among other things, exaggerating the coverage they offered and misleading consumers concerning their relationships with manufacturers. In its Final Order, issued on August 1, 2011, the Division concluded that U.S. Fidelis misled consumers by falsely claiming it had relationships with automobile manufacturers that enabled it to extend manufacturers' warranties when, in fact, U.S. Fidelis had no relationship with auto manufacturers and was offering consumers a repair contract offered by undisclosed third-party insurers rather than a manufacturer's warranty. The Division also found that the repair contracts U.S. Fidelis sold to consumers contained significant limitations and exclusions that were not disclosed to consumers and prevented most consumers from receiving any meaningful coverage for their vehicles.
Under the Final Order, U.S. Fidelis and its owners have been ordered to return $23,527,411 to as many as 16,972 Maryland consumers who purchased vehicle service contracts from the company. The Final Order also penalized U.S. Fidelis and the Atkinsons for each of their transactions with Marylanders by requiring them to pay a civil penalty of $1,697,200. The Final Order also contained injunctive relief that required the company and its owners to truthfully market their products and to comply with the Maryland Telephone Solicitations Act, which gives consumers a right to cancel their telephone orders unless they are provided written contracts that both fully identify the sellers from whom they are purchasing any goods or services and describe the goods or services that are being purchased and any limitations that may apply.
In March 2010, U.S. Fidelis filed for bankruptcy and on June 15, 2011, its owners were indicted by a Missouri grand jury on felony charges that include unlawful merchandising practices, theft and insurance fraud.
Consumers who wish to receive more information may call the Maryland Office of the Attorney General, Consumer Protection Division Hotline at (410) 528-8662 or toll-free at 1-888-743-0023.