Deceptive Extended Warranties

April 20, 2010

The Magnuson-Moss Warranty Act covers “service contracts,” frequently referred to as extended warranties. But the extended warranty most consumer receive is not an extension of the factory warranty, but a new contract from  company that may not have a consumer’s best interests in mind.

Missouri’s Attorney General recently sued 6 local extended warranty companies. The six warranty companies are:

  • National Dealers Warranty, Inc., a.k.a. StopRepairBills.com
  • Warranty Activation Headquarters, Inc., a.k.a. Nationwide Automotive Protection
  • Extended Warranty Corporation, Inc., a.k.a. Key Protection Group
  • Dealers Warranty, LLC, a.k.a. MOGI
  • U.S. Auto Warranty
  • Dealer Warranty Services

Unfortunately, many consumers will not benefit from a lawsuit filed by the government. The Attorney General has asked for “full restitution” for victims, but is unlikely, or unable, to speak to each of those victims individually.

Nor is the deception limited to those companies. Missouri’s Attorney General has also announced “a task force to look at sales practice guidelines designed to stop auto service contract fraud.” A primary concern is a new service contract, billed as an extended warranty, with coverage much worse than what a consumer had through the manufacturer.

One proposed solution is through regulation. In general, it appears most manufacturers and extended warranty companies tend to the bare minimum required by law. If no law exists, there is little financial incentive to try to satisfy consumers.

Another option is for individual consumers can hire their own attorneys to sue the extended warranty companies.

Finally, if a problem was first reported during the original factory warranty, the manufacturer may still retain responsibility for repairing the defect. The manufacturer’s warranty requires the issue to be corrected, regardless of whether the attempts take longer than the length of the warranty.

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