Extended Warranties for Cars Are ‘Fraught With Peril for Consumers’
As a single mother with one child, she worried about an unexpected repair on her six-year-old car and signed up for Driver’s Protection of St. Louis. ” She cheated on me. I bought it, ”she said.
After paying approximately $ 2,000 in premiums, the car’s check engine light came on. She was glad to have the police because the engine was supposed to be covered. But the company said the specific engine parts needed were not in the contract. So she took out a loan of $ 550 to have her car repaired. The company did not respond to its request for reimbursement. Those responsible for Driver’s Protection could not be contacted either at the company’s phone number or via its Facebook page.
More and more clients like Ms. Latham are interested in vehicle maintenance contracts. The business is expected to grow to involve billions of dollars in sales, according to a 2019 report from Colonnade Advisors, a Florida-based investment bank.
The reason for the growth: People are keeping their vehicles longer and worrying about repair costs, especially during the pandemic. “The last thing people wanted to do was take public transportation or be without a vehicle,” said Gina Cocking, CEO of Colonnade. “Having a vehicle maintenance contract was an argument that resonated with a lot of people. “
Service contracts are also becoming more familiar, Ms Cocking said. People buy them for smartphones and refrigerators and see them more and more on TV. “These ads are flying all the time. When you see them it starts to standardize the product, ”she said.
As business grows, so do complaints, according to BBB In 2019, the Better Business Bureau in the United States and Canada received about 6,700 complaints about companies offering service contracts. Last year that increased by 21% to almost 8,200.
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It may not seem like a large number nationwide, but a small number of complaints isn’t necessarily an indicator of consumer satisfaction, said Amy J. Schmitz, professor of law at the University of Missouri. , where she specializes in consumer protection. A 2004 survey by the Federal Trade Commission found that only about 8 percent of disgruntled consumers filed complaints with state or federal officials.
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