WASHINGTON, D.C. — The Federal Trade Commission (FTC) has mandated that NRRM, LLC, operating as CarShield, and its partner American Auto Shield, LLC (AAS), pay $10 million in a settlement addressing allegations of deceptive advertising and telemarketing practices. The companies misled consumers about their vehicle service contracts (VSCs), resulting in many paying up to $120 per month for services that did not cover expected repairs.
Deceptive Claims
CarShield, a Missouri-based company, advertises VSCs across the United States, often featuring endorsements from celebrities like Chris Berman and Ice-T. These endorsements assured consumers that CarShield plans would provide “peace of mind” and protection against vehicle breakdown costs. However, the FTC’s complaint alleges that CarShield’s advertisements falsely claimed that all repairs or repairs to “covered” systems would be paid for under the plans. Many consumers found that their chosen repair facilities did not accept the VSCs, and numerous repairs were not covered due to extensive exclusions.
Misleading Endorsements
The FTC also highlighted that CarShield’s celebrity endorsers falsely claimed to have used and benefited from the VSCs. In reality, these endorsements were not based on genuine customer experiences. Moreover, CarShield’s ads included consumer testimonials that falsely represented savings amounts from using their plans.
Settlement Details
The stipulated order settling the FTC’s complaint prohibits CarShield and AAS from making deceptive and misleading statements in the future. It also requires them to ensure that their endorsers’ testimonials are truthful and accurate. Additionally, the order bars the companies from failing to disclose necessary information and from violating the FTC’s Telemarketing Sales Rule.
The settlement includes a $10 million monetary judgment against CarShield and AAS, which will be used to provide refunds to defrauded consumers. The full amount must be paid to the FTC within seven days of the court’s order. The order also imposes compliance and reporting requirements for up to ten years to ensure adherence.
Consumer Impact
Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, emphasized the importance of protecting consumers’ investments in their vehicles. “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,” Levine said. “Instead of delivering the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache.”
Legal Proceedings
The Commission’s unanimous vote to file the complaint and proposed order underscores its commitment to holding advertisers accountable for deceptive practices. The complaint and proposed order were filed in the U.S. District Court for the Eastern District of Missouri, with assistance from the Missouri Attorney General’s Office.
By taking this action, the FTC aims to uphold fair business practices and protect consumers from misleading claims that exploit their financial anxieties.
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