Judge Orders Halt to Illegal Robocalls Selling Deceptive Warranties

May 15, 2009 — Today Judge John F. Grady of the United States District Court for the Northern District of Illinois issued a temporary restraining order stopping telemarketing company Voice Touch, Inc., its principals James and Maureen Dunne, its business partner Network Foundations LLC, and Network Foundations principal Damian Kohlfeld from making any further calls in violation of the Do Not Call Registry and other provisions of the Telemarketing Sales Rule and the FTC Act. The FTC filed the case yesterday, charging that the defendants were operating a massive telemarketing scheme that used random, pre-recorded phone calls to deceive consumers into thinking that their vehicle’s warranty is about to expire.

“Today the FTC has disconnected the people responsible for so many of these annoying robocalls,” said FTC Chairman Jon Leibowitz. “We expect to see a dramatic decrease in deceptive auto warranty calls, but we are still on high alert.” If consumers continue to receive unsolicited robocalls to numbers on the Do Not Call registry, they should report them to DoNotCall.gov.

In a related matter filed by the FTC, Judge Grady yesterday issued a temporary restraining order against automobile warranty sales company Transcontinental Warranty, Inc., and its CEO and president, Christopher Cowart, who are clients of Voice Touch. In both cases, the court found that the FTC established a likelihood of success on the merits.

The court barred deceptive claims about extended warranties, froze the defendants’ assets, and appointed receivers over Transcontinental and Network Foundations to ensure that documents are preserved and assets are not dissipated. The restraining orders are in effect until a preliminary injunction hearing set for May 29, at which time the judge will reassess what type of relief should remain in place until the case proceeds to trial.

How to Steer Clear of Auto Warranty Scams

The Federal Trade Commission (FTC), the nation's consumer protection agency, urges you to be skeptical of mail and phone calls warning that the warranty on your car is about to expire. The companies behind the mail and calls may give the impression they represent your car dealer or manufacturer. With phrases like "Motor Vehicle Notification," "Final Warranty Notice," or "Notice of Interruption," they are trying to make the offer seem urgent – and to get you to call a toll-free number for more information.

More than likely, these pitches are from unrelated businesses that want to sell you extended warranties – more accurately known as service contracts – that often sell for hundreds or thousands of dollars. If you respond to a call from a business pitching so-called extended warranties, you're likely to hear high-pressure sales tactics, as well as demands for personal financial information and a down payment, before you get any details about the service contract. And if you buy a service contract, you may find that the company behind it won't be in business long enough to fulfill its commitments.

Protect Yourself

So how can you steer clear of scam auto warranty offers? The FTC says:

• If you get mail or phone calls about renewing your vehicle warranty, don't take the information at face value. Your vehicle's warranty may be far from expiring – or it may have expired already. If you have a question about your warranty, check your owner's manual, call the dealer who sold you the car, or contact the vehicle manufacturer.
• Be alert to fast talkers. Telemarketers pitching auto warranties often use high-pressure tactics to hide their true motive. Take your time. Most legitimate businesses will give you time and written information about an offer before asking you to commit to a purchase.
• Never give out personal financial or other sensitive information like your bank account, credit card, or Social Security numbers – even your driver's license number or Vehicle Identification Number (VIN) – unless you know who you're dealing with. Scam artists often ask for this information during an unsolicited sales pitch, and then use it to commit other frauds against you.
• Be skeptical of any unsolicited sales calls if the call is a recorded message or if your phone number is on the National Do Not Call Registry. You shouldn't get recorded sales pitches unless you have recently done business with the company or you have specifically agreed to accept such calls. And if your number is on the National Do Not Call Registry, a salesperson may call you only if you have agreed to accept calls from thecompany the salesperson works for, if you have bought something from the company within the last 18 months, or if you have asked the company for information within the last three months. To report violations of the National Do Not Call Registry or to register a phone number, visit DoNotCall.gov or call 1-888-382-1222.

Service Contracts

A service contract is a promise to perform (or pay for) certain repairs or services. Although a service contract is sometimes called an extended warranty, it is not a warranty as defined by federal law. A service contract may be arranged any time and always costs extra; a warranty comes with a new car and is included in the original price. Used cars also may come with some type of coverage. The separate and additional cost distinguishes a service contract from a warranty.

Auto service contracts may be sold by vehicle manufacturers, auto dealerships, or independent providers. If you want to buy a service contract, shop around so you understand just what you're buying. Coverage varies widely. Other tips:

• Research the company responsible for paying your claims (usually called the contract administrator or the service contract provider). Service contract sellers (also called brokers) do not decide what repairs are covered under the service contracts they sell, and they may assert that they have no further responsibility to you once you buy the service contract.
• Check on licensing and registration within your state. While many states do not regulate contract administrators, some states (including California, Florida, and New York) have strict regulations.
• Before you do business, check out the seller and the contract administrator with your state Attorney General (www.naag.org), local consumer protection agency (www.consumeraction.gov), and the Better Business Bureau (www.bbb.org) to make sure no unresolved complaints are on file. The phone numbers for these organizations are in your phone book or available through directory assistance or Internet directories.

Source: Federal Trade Commission press release.

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