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08.10.2009 3:37 pm

Service-contract sellers pull back away from the term “warranty”

St. Louis Post-Dispatch
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Companies that sell extended auto-service contracts frequently are accused of deceiving consumers, violating telemarketing laws, peddling worthless products and failing to give refunds owed to customers upon cancellation.

Those allegations tend to dominate news coverage of the industry, and they rarely leave much room for another of the industry’s alleged sins — the widespread misuse of the word “warranty.”

Government regulators and sticklers for language often point out that only a manufacturer can offer a warranty — extended or otherwise — and marketers of extended service contracts don’t make anything. What’s more, the thinking goes, you don’t usually buy a warranty. You buy a product and it either has a warranty or it doesn’t.

One would assume that, given the thousands of consumer complaints about the service-contract industry and multiple government investigations into it, correcting this semantic transgression wouldn’t be a top priority.  Yet the industry seems to be backing away from the word “warranty,” and here’s some recent examples:

I’ve talked to others who follow the service-contract industry, and they’ve also noticed a pull-back from the word “warranty.” One theory is that dropping the word from solicitations is a demand of the 40 or so state attorneys general that are investigating several prominent service-contract brokers. The AGs are believed by industry insiders to be negotiating a legal settlement with the companies.

Mary Lobdell is the assistant attorney general for Washington state that is leading the multi-state investigation. She wouldn’t say whether the AGs would seek to prohibit the use of “warranty” to describe service contracts. She did, however, say “that’s one of the issues that all of the states have had with these companies.”

The Post-Dispatch generally calls the vehicle-protection products sold by these companies “extended auto service contracts,” or just “service contracts” for short. The odd “extended warranty” or “aftermarket warranty” sometimes slip in stories, but not that often.

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4 comments

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“The AGs are believed by industry insiders to be negotiating a legal settlement with the companies.” If this statement proves to be true, it is what these slimeballs are hoping for. It is just a slap on the wrist to pay a fine; they will continue to do business as usual. Case and point: the April promise from US Fidelis to reform and the BBB’s report in July reported here at STL today that they have not kept their promise.

— Taxpayer
1:27 am August 11th, 2009

I call Mogi and USF want a joke. Anyone that buys from these companies are nuts.

— White Collar Crooks
2:32 am August 12th, 2009

http://www.warrantybureau.com/index.html

A new kind of warranty thief. Bashing the rest hoping for business.

— Walker
2:36 am August 12th, 2009

They need to be sold as insurance policies (and regulated as such).

— suzyjax
5:52 am August 15th, 2009