The Federal Trade Commission is distributing more than $9.6 million in refunds to consumers who were misled by CarShield's deceptive advertising for vehicle service contracts, the agency announced. The refunds will reach 168,179 affected consumers who purchased contracts from CarShield and American Auto Shield, LLC based on false promises about coverage and benefits.
The refunds stem from a settlement reached in July 2024 between the FTC and CarShield, a prominent seller of vehicle service contracts, along with American Auto Shield, LLC, which administers the contracts. The companies agreed to pay nearly $10 million to resolve FTC allegations that their marketing practices violated consumer protection laws.
According to the FTC complaint, CarShield's advertisements and telemarketing campaigns made several deceptive claims that left consumers paying for coverage they thought they had purchased. Many customers discovered that repairs they believed would be covered under their plans were actually excluded, despite paying monthly premiums of up to $120.
The FTC alleged that CarShield's marketing deceptively represented three key benefits that consumers did not actually receive. First, the ads suggested that all repairs to consumers' vehicles, or to "covered" systems within their vehicles, would be paid for under the service plans. Second, the company promised consumers would receive a rental car at no cost if their vehicle broke down. Third, CarShield represented that consumers could use the repair facility of their choice for covered repairs.
These misleading claims affected thousands of consumers who purchased vehicle service contracts believing they would receive comprehensive coverage and convenient service options. Instead, many found themselves facing unexpected out-of-pocket expenses when their vehicles needed repairs that were excluded from coverage despite the broad promises made in CarShield's advertising.
Vehicle service contracts, often marketed as extended warranties, are designed to cover certain repair costs after a manufacturer's warranty expires. However, these contracts typically contain numerous exclusions and limitations that can leave consumers responsible for significant repair costs. The FTC's action against CarShield highlights the importance of clear, accurate advertising in this market segment.
Under the settlement order, both CarShield and American Auto Shield are now prohibited from making deceptive and misleading statements when advertising their vehicle service contracts. The companies must also ensure that any endorser testimonials used in their marketing are truthful, accurate, and not misleading to consumers.
The FTC is mailing refund checks directly to affected consumers, who have 90 days to cash their payments as indicated on the checks. Consumers who have questions about their refund payments can contact the refund administrator, Analytics, at 855-298-8877. Additional information about the refund process is available through frequently asked questions posted on the FTC's website.
The agency emphasizes that it never requires people to pay money or provide account information to receive a refund. Consumers should be wary of any communication requesting payment or personal financial information in connection with FTC refunds, as these are likely scams.
This enforcement action is part of the FTC's broader efforts to protect consumers from deceptive marketing practices in the automotive services sector. The Commission's interactive dashboards provide state-by-state breakdowns of refunds distributed in FTC cases, offering transparency about the agency's consumer protection efforts.
The CarShield settlement represents a significant portion of the FTC's 2024 consumer refund activities. According to the agency, FTC actions in 2024 led to more than $339 million in refunds distributed to consumers across the country, demonstrating the substantial impact of the Commission's enforcement efforts on behalf of American consumers.
For consumers considering vehicle service contracts, the CarShield case serves as a reminder to carefully review contract terms and limitations before making a purchase. The FTC recommends that consumers read all contract documents thoroughly, understand what repairs are and are not covered, and be skeptical of marketing claims that seem too broad or comprehensive.
The settlement also underscores the FTC's commitment to holding companies accountable when their advertising practices mislead consumers about the products and services they are purchasing, particularly in markets where consumers may face significant financial consequences from inadequate coverage.