One of the most obnoxious and deceptive marketing campaigns I have ever seen is taking place right now. It uses postcards, letters, and phone calls to sell outrageously priced extended warranties.
The mailings look like an important notice from your car dealer or automaker. There is always an eye-catching warning on the front of the card, such as: “Final Notice: Expiring Auto Warranty.”
Marla Wolfe gets a couple postcards a week telling her she needs to renew her car warranty. “I bought my car without an extra warranty,” she tells me, “so there’s nothing to renew.”
The postcards are annoying enough. Now there are constant phone calls trying to sell her an extended warranty. Wolfe received five calls in one day.
“It’s out of control,” she says. “It’s constant. It’s non-stop. I don’t know what to do. I don’t want their product. I don’t want to be scammed into whatever they’re trying to sell. If this keeps up I’ll go insane.”
Gari Weinraub’s phone number is on the national Do Not Call Registry. And yet, she gets at least one of these warranty calls a day. Weinraub knows the warranty on her 1990 Honda isn’t about to expire. It did that a long time ago.
Even worse, these sales calls are on her cell phone, a number she considers so private only family and a few friends have it. Federal regulations prohibit sales calls like these to cell phones.
“I hate it,” Weinraub says. “It’s an invasion of my privacy.”
These sales calls are going out at all hours of the day and night. I have spoken to a number of people who had their phones ring at 4 a.m., a clear violation of federal regulations that prohibit sales calls before 8:00 a.m. local time.
Complaints pour in
The bulk of the companies doing this are located near St. Louis. The Better Business Bureau of Eastern Missouri and Southern Illinois lists 92 extended warranty companies in that area. They are responsible for a huge number of complaints from across the country.
Many of the complaints deal with deceptive advertising and high-pressure sales tactics. Unhappy customers say they could not cancel and get a refund as the salesperson promised on the phone.
Some people who buy the warranty find that they have problems using it. According to Chris Thetford with the St. Louis BBB, potential customers are told their extended warranty covers all kinds of repairs. “In fact,” he says, “a very, very limited range of things are covered.”
Missouri Attorney General Jay Nixon is now investigating many of the companies selling these warranties in his state. We should know in a few weeks if his office decides to take any legal action.
ConsumerMan’s undercover call
I have received a bunch of these warranty expiration notices, so I decided to respond to one from Vehicle Services in St. Peters, Mo. I gave the salesman, Corey, my real name and valid information about my car.
Before he would give me the price, Corey passed me off to Chris, the program director. Chris explained that this was a one-time deal and if I said no, their computer system would “automatically delete” my files at the end of the phone call. That was clearly designed to put pressure on me to make an on-the-spot decision.
Now it was Corey’s turn to close the deal. He had good news. I “qualified” for full coverage: four years or 48,000 miles. And he was going to waive the vehicle inspection.
By activating my coverage today, I would get 20 percent off the retail price. With that discount, the cost of the four-year coverage was $3,110 or $777 a year. Corey offered a variety of payment plans and pointed out several times that this was not a contract. “You are not obligating yourself to anything,” he kept saying.
“Can you guys send me this policy, so I can see all this in writing and I can get back to you?” I asked.
“We don’t actually send out any paperwork without receiving a down payment,” Corey explained. He said once I paid, the policy would be mailed to me within seven to 10 business days.
Needless to say, I did not buy anything. Instead, I called back and identified myself as a reporter, but no one would talk to me.
A bad deal all around
Like most consumer advocates, Robert Krughoff, president of checkbook.org, advises car owners to skip extended warranties because they are rarely worth the money. He is appalled at the idea of buying one this way.
“You would never want to buy an extended service contract without seeing in writing exactly what’s covered and what you have to do to make a claim,” Krughoff says.
What about the great price Vehicle Services offered me? Krughoff calls it “outrageous.” By comparison, my car dealer would sell me a three-year/36,000 mile extended warranty for $1,795 or $598 a year. As Krughoff pointed out, as with everything at a car dealer, that price was negotiable.
My two cents
The companies using these deceptive and sleazy sales tactics must be stopped and brought to justice. They are making a mockery of the Do Not Call Registry and the government’s rules regarding telemarketing sales.
If you are the recipient of one of these sales calls, file a complaint with the Federal Trade Commission. The government has the power to sue these companies, fine them, and make them stop any misleading sales practices.