CarShield customers upset when repairs aren't covered; regulators take action

Those ubiquitous CarShield commercials — where "Law & Order: SVU" star Ice-T clues all of us into a way to cover nasty car repair bills — have been falling short on telling the truth, according to federal regulators.

"If your car's out of warranty, it's not a matter of 'if,' " the popular actor and rapper tells us, "it's a matter of 'when' your car will break down."

Thousands of dollars in unexpected bills? All that extra money out the door? My gosh, what will you do? It's a stressful scenario that too many family budgets just cannot afford. So, the pitch hits home when we hear phrases on these commercials such as, “you’ll never pay for expensive car repairs again.”

Except, the Federal Trade Commission noted in a complaint filed July 31, that many CarShield customers complained that they had to do just that. An FTC blog said: "CarShield shielded consumers from the truth about limitations of its vehicle service contracts."

Detroit driver explains how her repair wasn't covered

Daisy Jackson, 68, of Detroit, despises all those CarShield commercials after she couldn't use her vehicle contract to cover a costly transmission repair for a used 2009 GMC Acadia that her son bought for her for her birthday a few years before the pandemic hit in 2020.

"It's terrible what they're doing," she told me by phone Friday.

She recalls paying roughly $99 a month for CarShield — maybe adding up to nearly $3,000 or more over a few years on that Acadia.

When it came time a few years go to fix the transmission, the AAMCO transmission shop sent the paperwork to CarShield and she was rejected for coverage.

The reason? CarShield, she recalled, had stated that the car's odometer had been turned back a couple of times to make the mileage look like it was lower than 100,000 when it wasn't. As a result, Jackson said, she was told that she didn't qualify for coverage under the plan she bought because her car's mileage was really over 100,000.

So, she wondered: CarShield could figure out that the odometer was turned back when she made a claim? But they couldn't figure that out when she was signing up for the plan? And making payments each month?

Jackson said she didn't know the odometer was turned back when the car was bought. She doesn't recall exactly how many miles the car had when she got it but remembers it was around 70,000 or so, definitely less than 100,000.

She thinks CarShield should not have sold her coverage initially if that was the case.

At one point, she asked CarShield to give her the money back for the monthly payments from the time she had coverage until the time they canceled it since the car couldn't be covered. "They wouldn't do that," she said.

Jackson ended up paying about $2,500 out of pocket to fix the transmission, figuring her granddaughter might still be able to use the GMC. But the transmission failed roughly a year later anyway.

"Why do they have commercials advertising CarShield when they are a scam?" Jackson asked me.

"I don't understand that. How could they get away with that? Advertising like they do good work and they repair your car. No, they don't."

What the FTC said about CarShield

Consumers paid for "peace of mind," but often ended up getting stuck with the bill for the "very repairs they were assured would be covered," according to a Federal Trade Commission complaint filed on July 31 in the U.S. District Court for the Eastern District of Missouri.

The FTC charged that the company that does business as Car Shield — called NRRM LLC — engaged in deceptive advertising and telemarketing for vehicle service contracts.

NRRM — which also operates American Auto Shield, the company that administers repair claims brought under vehicle service contracts sold by CarShield — agreed to a $10 million proposed settlement. The proposed order, which must be approved by the court, would prohibit CarShield from mispresenting such claims in the future and failing to make required disclosures, among other things.

The order would impose a reporting and compliance provision that would last up to 10 years.

More: Car warranty scams, robocalls are tricking drivers: What to know

Many drivers paid an extra $80 to $120 a month — which adds up to $960 to $1,440 over a year — to cover unexpected car repairs only to discover later that many repairs or services weren't covered, according to the FTC.

Many consumers could not use the mechanic or dealership of their choice, despite company claims. And many did not receive a rental car when their vehicle broke down, according to the FTC complaint.

Matthew Scheff, an FTC attorney, said the heart of the case involves the company overstating what the service contracts covered, and what the benefits were, in its ads and not disclosing important exclusions and limitations.

The FTC reviewed a significant number of consumer complaints, he said. Among other things, he said, consumers complained that some mechanics wouldn't even accept their vehicle service contracts to cover any work because the repair shops had a hard time getting reimbursed.

And some repairs weren't covered in full. Take the engine.

While CarShield ads stated their engine would be protected, Scheff said, consumers who faced car repairs later were shocked to learn that some engine parts were excluded from coverage.

Anyone who has had trouble with their car these days knows that many times, you're going to need to pay for upfront diagnostic work to determine the source of the problem. Seems like that cost should be covered, too.

But Scheff noted that consumers had to pay upfront for diagnostic work before actually knowing if the repair would be covered under the vehicle service contract. The cost of the work would only be covered if the repair itself was covered.

Roll the dice. Do you want to pay for diagnostic work now? Especially if you cannot afford to cover a big car repair that might not be covered under the service contract?

If the repair claim was ultimately denied, the FTC complaint noted, the consumer was on the hook for the cost of the diagnostic work. The FTC noted in its complaint that the telemarketer does not inform consumers of their "obligation to authorize, and in many cases, pay for, diagnostic work to determine the cause of their vehicle’s breakdown."

Digging deeper into the FTC complaint, we discover that even repair shops in the group's network are under no obligation to accept the reimbursement rates, which as many consumers know can really drive up your out-of-pocket costs, even when claims are approved. One consumer with coverage had to pay $895 for an air conditioning repair. Why? The shop refused to install a shipped-in part, the FTC stated, and American Auto Shield "refused to pay the full amount charged by the repair facility for its part."

In some cases, the FTC report noted that the coverage didn't include the full charge for labor costs.

CarShield says it improved some services, blames pandemic

CarShield did not answer questions from the Detroit Free Press, including the situation faced by the Detroit retiree. The company's emailed response referred to an online statement, which indicated that the company disagreed with "many of the assertions from the FTC." But the company said it shared the FTC's commitment to helping customers understand the coverage.

Among other points made in its statement, CarShield said it significantly expanded its repair network by adding more than 10,000 preferred car repair shops and a concierge system to help customers quickly locate a repair facility. The company said it also has improved its car rental coverage.

The statement also blamed the pandemic, which put pressures on the auto industry. "Rental car agencies were out of cars, transmission and engine vendors had no parts to give, and don't forget the dreaded China chip shortage," according to the online statement by Michael Carter, the company's general counsel.

"The already stressed mechanic labor pool with an average age of 50-plus shrank dramatically," Carter wrote. But he stressed that CarShield is "stronger and more reliable than ever."

In 2021, the Better Business Bureau of Greater St. Louis and the BBB of the Great West and Pacific both issued alerts due to a pattern of consumer complaints. Consumers took issue with what the vehicle service contracts covered and and what repair shops consumers could use for repairs.

In some cases, consumers complained that exclusions “are only disclosed if the consumer reads the agreement after the sale.”

More: Some auto lease deals give consumers a way to save $200 or so on monthly car payments

More: Car buyers should pay attention to costly problems while new transparency rule is on pause

Consumers still complaining in 2024

On online check of BBB complaints now indicated that consumers still faced issues in July, even though the company was listed with an A+ BBB rating.

I reached out to the BBB and asked why an A+ rating?

The BBB is currently aware of the FTC action and is reviewing the matter, according to an emailed response to the Free Press by Christopher Thetford, the chief operating officer for the Better Business Bureau serving Eastern and Southwest Missouri & Southern Illinois. CarShield, founded in 2005, is based St. Peters, Missouri.

According to BBB data online, some 3,300 complaints involving CarShield were closed in the last three years, nearly a third of those complaints were closed in the past 12 months. CarShield states online at its site that it has covered more than 2 million vehicles over the years.

A review of several recent complaints posted online at BBB.org. indicated that CarShield agreed to resolve complaints filed in July by refunding six months or 12 months of payments, according to a review of the most recent online posts by consumers. That's if the consumer signed a settlement agreement.

According to one complaint dated July 21, a frustrated consumer detailed watching a vehicle sit in the certified shop for six weeks without getting fixed because the shop was seeking service records for 2024. The only record the consumer had was for a $500 repair in 2024 but, according to the consumer, the shop wouldn't accept it because the repair was done at a small place that "hand writes their tickets." Based on the company's online response, the amount of mileage on the car is in question.

"No verifiable service records have been submitted to show accurate current mileage of the vehicle. Without proper mileage documentation, your contract will be voided," the response stated. But the company offered to refund payments in full if the consumer signed a settlement agreement. The consumer agreed to the resolution.

Another customer continued to be unhappy in July dealing with a failed transmission from November 2023. Part of the consumer's response included: "I learned during this ordeal that my auto shop no longer accepts Car Shield Policies, but they did in this case as a favor to me." The consumer rejected the company's response that the claim was "adjudicated correctly."

In another case, a consumer complained that CarShield left them with a bill that wouldn't cover more than $1,000 in labor for a repair. "This company is a nightmare!" the consumer said on July 15. The business response: "American Auto Shield has authorized $3,821.29 in claims, which is significantly more than you have paid into the contract. Therefore there is no refund due."

As for celebrities who claimed to be customers? American sportscaster Chris Berman? Ice-T? TV host Vivica A. Fox? The reality TV actress from the old series "Overhaulin'" Adrienne "AJ" Janic? And "Ghostbusters" star Ernie Hudson?

Many times, seeing a well-known face on a commercial can give consumers more confidence in a brand, more hope that they'll get a fair deal.

The Federal Trade Commission complaint, though, raised concerns about celebrity endorsements for the car service contracts. Some celebrities were "nominally contract holders" but never actually used their service contracts for repairs, according to the FTC complaint.

In other instances, endorsers used their service contracts for repairs, the FTC stated, but CarShield and American Auto Shield "treated them as 'preferred customers' and approved repair claims that would not have been approved for a typical consumer."

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X (Twitter) @tompor.

This article originally appeared on Detroit Free Press: CarShield complaints soar, leading to $10 million settlement with FTC