ST. LOUIS — The Federal Trade Commission filed a complaint seeking a permanent injunction in federal court against American Auto Shield and CarShield alleging deceptive marketing practices and the parties agreed to a stipulated order.
The FTC alleges NRRM, which is doing business as CarShield, and American Auto Shield used deceptive practices in marketing vehicle service contracts, according to the stipulated order for permanent injunction, monetary judgment and other relief filed July 31 in U.S. District Court for the Eastern District of Missouri.
The defendants allegedly made false claims about the coverage, repair options and benefits of their VSCs, violating both the FTC Act and the Telemarketing Sales Rule, the FTC claims.
To resolve the dispute, the FTC and the defendants agreed to the stipulated order.
"For many consumers, a personal vehicle is one of their most valuable assets and a vital lifeline for getting to work, taking their kids to school, and obtaining medical care," Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, said in a statement. "Instead of delivering the 'peace of mind' promised by its advertisements, CarShield left many consumers with a financial headache."
Levine said the FTC would hold the defendants accountable.
"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."
The parties agreed that the defendants are permanently enjoined from making false statements about the extent of coverage, benefits or conditions related to their service contracts, which includes misrepresentations about repair costs, available repair facilities and any out-of-pocket expenses for consumers.
The defendants must also refrain from misrepresenting any material aspects of their services or failing to disclose all material conditions and restrictions related to their offers, the order states. They must also comply with the TSR, which governs telemarketing practices.
The parties agreed that the defendants are prohibited from falsely claiming that endorsers have used or have had positive experiences with their products or services.
AAS is required to provide a copy of the order to all sellers or marketers of their service contracts and ensure they acknowledge receipt and compliance, the order stipulates.
AAS must also implement a system to monitor advertising and marketing materials for compliance, according to the order
The order stipulates a monetary judgment of $10 million is imposed on the defendants, to be paid to the FTC.
The amount must be transferred within seven days of the order and the funds will be used for consumer redress or other related relief as determined by the FTC.
The order also laid out additional provisions, including that the defendants must relinquish all rights to the assets transferred under this order, and any future litigation related to this order will accept the allegations in the complaint as true.
They must also provide full customer information for redress administration and submit acknowledgments of receipt of the order, it stipulates.
The defendants are required to keep detailed records related to their business activities and consumer interactions for a minimum of 10 years and submit compliance reports to the FTC annually.
The FTC is authorized to conduct thorough monitoring and investigations to ensure compliance with the order, which includes the right to request additional information, conduct interviews, and use various lawful means to enforce the order, according to the order.
The order aims to protect consumers from deceptive practices and ensure that the defendants adhere to the regulations outlined by the FTC and TSR, the order states.
NRRM and AAS are represented by Allen H. Denson and Daniel S. Savrin of Morgan Lewis & Bockius; and Michael E. Carter, general counsel for NRRM.
The FTC is represented by Matthew M. Scheff, Adrienne M. Jenkins and Sammi D. Nachtigal of the FTC in Cleveland.
U.S. District Court for the Eastern District of Missouri case number: 4:24-cv-01055