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FTC sues to halt warranty 'robo-calls'

Federal regulators are filing suits against several companies they say are behind a national wave of spam "robo-calls" that warn people their auto warranties are expiring.
/ Source: The Associated Press

Federal regulators filed suits Thursday against several companies they say are behind a national wave of spam "robo-calls" that warn people their auto warranties are expiring and offer new service plans.

Federal Trade Commission officials said they asked a federal court in Chicago to halt the illegal telemarketing campaign of "Your Car Warranty Has Expired." Officials say as many as 1 billion of the nuisance calls have been made to Americans.

The FTC named Voice Touch Inc. and Transcontinental Warranty Inc., which it called the telemarketer and promoter of the scheme, respectively, in the lawsuits. The agency is seeking injunctions forcing them to return allegedly ill-gotten gains.

FTC Chairman Jon Leibowitz called it "one of the most aggressive" telemarketing schemes the agency has ever seen.

"I'm not sure which is worse, the abusive telemarketing tactics of these companies, or the way they try to deceive people once they get them on the phone," Leibowitz said. "Either way, we intend to shut them down."

It took some heavy sleuthing to determine what companies were responsible since they made "extraordinary" efforts to conceal their identities by masking their true phone numbers, he said. Such concealment by telemarketers is illegal, as is refusal to promptly identify themselves to consumers.

If a consumer received such a call about his car warranty, "there's a very real chance that these guys did it," Leibowitz told reporters in a conference call.

Representatives from Voice Touch and Transcontinental Warranty couldn't be reached for comment Thursday afternoon.

May consider fines
While seeking return of allegedly illegal profits from the companies, the FTC isn't immediately seeking civil fines against them but may consider doing so later on, agency officials said.

Attorneys general in Arkansas, Indiana and Missouri have taken similar actions over the calls offering deals on extended warranties, which have brought about 300,000 inquiries and 4,000 complaints to the Better Business Bureau from consumers over the past two years. The calls come even if the consumer has signed up for the national "Do Not Call" registry, which is maintained by the FTC.

The calls target people regardless of whether they have warranties or even own cars. They call numbers randomly and leave messages with a computerized voice telling people, falsely, that their auto warranties are about to expire, regulators say.

The telemarketers are misrepresenting service contracts — which consumers have to pay for — as warranties, which are included in the price of buying a vehicle, the FTC says.

"Out of warranty? You are still eligible to reactivate warranty coverage. This is the final call before we close the file." The recording typically gives the caller an option to stop receiving calls, but they continue to come even if consumers opt out.

"This is where you're told to push No. 1 to speak to a representative, or push No. 2 to be removed from the list. I've pushed that No. 2 button so many times from their calls, I've broken two phones!" said Craig Michie of Las Vegas.

"I've been faced with these calls for years," Michie said by telephone on Tuesday. "I would attempt to talk to the telemarketers and ask them not to call. They only called back."

If people call back and agree to buy policies, the companies often don't let them see the contracts until they agree to pay. And some people don't learn until they've spent thousands of dollars that the deals don't cover many types of repairs, according to regulators.

In addition, the computerized calls can eat up a consumer's cell phone minutes, possibly jacking up phone charges, Sen. Charles Schumer, D-N.Y., said earlier this week. He had previously asked for an investigation by the FTC into what he called a scam of "robo-dialer harassment."