FTC to ban auto warranty operation

Federal Issues FTC Enforcement Courts FTC Act Telemarketing Sales Rule Auto Finance

On March 24, the FTC announced that a Florida-based group of operators (defendants) faces a permanent ban from the extended automobile warranty industry and will be barred from any further involvement in outbound telemarketing. As previously covered by InfoBytes, the defendants allegedly violated the FTC Act and the Telemarketing Sales Rule by allegedly engaging in deceptive practices when marketing and selling automobile warranties. According to the FTC, the defendants, among other things, (i) misrepresented their affiliation with consumers’ car dealers or manufacturers; (ii) misrepresented warranty coverage; (iii) falsely promised consumers they could obtain a full refund if they cancelled within 30 days; (iv) used remotely created checks, which are illegal in telemarketing transactions; and (v) placed unsolicited calls to numbers on the do not call registry. The proposed stipulated order for permanent injunction, filed in the U.S. District Court for the Southern District of Florida, would require the defendants to pay a $6.6 million monetary judgment and would impose a permanent industry ban. However, the monetary judgment is largely suspended based on the defendants’ inability to pay.