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Financial Services Law Insights and Observations

FTC bans operators of auto-warranty scam

Agency Rule-Making & Guidance FTC Telemarketing Consumer Protection Deceptive

Agency Rule-Making & Guidance

On July 6, the FTC announced that it reached an agreement on a stipulated order to resolve a lawsuit against the operators of a telemarketing scam that pitched “extended automobile warranties” to hundreds of thousands of consumers nationwide.  The stipulated order, which has been approved by the U.S. District Court for the Southern District of Florida, imposes a lifetime ban against a consulting group and its owner from any outbound telemarketing business and any involvement with extended automobile warranty sales. In February 2022, the FTC sued several companies—including the consulting group and its owner—in connection with their alleged involvement in the telemarketing scam, alleging that they had defrauded consumers out of millions of dollars. The complaint alleged that the companies made numerous unsolicited calls, falsely claiming to be affiliated with vehicle manufacturers and inaccurately promoting their products as offering comprehensive “bumper-to-bumper” protection.  

In addition to the lifetime ban, the stipulated order includes a monetary judgment of $6.5 million, which is partially suspended based on the defendants’ alleged inability to pay. The FTC reached a separate settlement with three of the other original defendant companies and their owners in March 2023.