CarShield Agrees to $10 Million FTC Settlement Over Deceptive Vehicle Service Contract Ads

The Federal Trade Commission (FTC) has reached a $10 million settlement with CarShield and its administrator, American Auto Shield (AAS), over allegations of deceptive advertising practices related to vehicle service contracts (VSCs). The settlement, announced on July 31, 2024, addresses claims that the companies misled consumers about the coverage and benefits of their vehicle protection plans.

CarShield, a nationwide seller of VSCs, was accused of making false promises in its advertisements, including assurances that all repairs or repairs to "covered" systems would be paid for under their plans. The FTC complaint alleges that many consumers found numerous repairs were not actually covered, despite paying monthly fees of up to $120.

Samuel Levine, Director of the FTC's Bureau of Consumer Protection, stated, "Instead of delivering the 'peace of mind' promised by its advertisements, CarShield left many consumers with a financial headache." He also criticized the company's use of trusted personalities to deliver what he called "empty promises."

The FTC's investigation revealed that CarShield's ads, which often featured celebrities like sports commentator Chris Berman and actor Ice-T, claimed to offer comprehensive protection against expensive vehicle breakdowns. However, the plans contained numerous exclusions that were not clearly disclosed to consumers.

Additionally, the complaint addressed misleading claims about rental car coverage and consumers' ability to choose their preferred repair facility. Many consumers found they could not use the repair shop of their choice, as many facilities do not accept CarShield's VSCs.

The settlement prohibits CarShield and AAS from making misrepresentations about their services and requires them to ensure that endorser testimonials are truthful and accurate. The companies are also barred from violating the FTC's Telemarketing Sales Rule.

The $10 million monetary judgment will be used to provide refunds to affected consumers. This case serves as a reminder of the FTC's commitment to protecting consumers from deceptive advertising practices, particularly in industries that target financial anxieties.

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