FTC Proposed Order: Lifetime Ban for Telemarketing Operators of “Extended Vehicle Warranty” Scams

On March 24, 2023, the Federal Trade Commission (FTC) announced that it settled a case against three companies plus individuals charged with running a telemarketing extended auto warranty scheme that cheated people out of more than $6 million. The FTC charged those three companies and their owners for running the fraudulent operation that scammed millions of dollars from unsuspecting consumers.

The FTC initially charged American Vehicle Protection Corporation (AVP), the owners, and operators of the fraudulent scheme, with violating the FTC Act and the Telemarketing Sales Rule in February 2022. The complaint alleged that AVP made unsolicited calls claiming to be affiliated with vehicle makers, and deceptively claimed that their products offered “bumper-to-bumper” protection that cost thousands of dollars.

According to the FTC, AVP used cold-calling tactics to reach potential customers and falsely claimed to be affiliated with car manufacturers or authorized dealers. The company also allegedly misrepresented the terms of the extended auto warranties they were selling, promising “full vehicle” protection and 30-day reimbursements if customers were unsatisfied. However, the written contract, which was only sent after a down payment was made, apparently listed numerous exceptions such that obtaining a refund within 30 days was nearly impossible.

Additionally, according to the FTC, the defendants also misled customers about their identity and the products they were selling. They also contacted a vast number of consumers who were on the FTC’s Do Not Call List, which violates the Telemarketing Sales Rule.

If the court enters the proposed orders, the operators of the fraudulent scheme will be banned from the extended automobile warranty industry and all outbound telemarketing for the rest of their lives, as per the proposed court orders.

The defendants have apparently agreed to the terms of the proposed court orders. The orders also impose a monetary judgment of $6.6 million, which is largely suspended based on the defendants’ inability to pay. However, if the defendants are found to have lied to the FTC about their financial status, the full judgment would be immediately payable.