Monday, July 20, 2009

Class Action Filed Against Extended Car Warranty Schemers

TT Note: Gee, you think someone can now go after all the phone calls coming from some un-named credit card company offering to lower my rates? You know the calls. A computer tells you if you act now, they can help. Sorry. I'll try to get to it right after I win the lottery.

/PRNewswire/ -- Please hold for an important notice about your automobile warranty: You are at risk of getting scammed.

That's the message in a class action complaint filed in the U.S. District Court for the Northern District of Illinois by Jonathan J. Sahim, individually and on behalf of other customers nationwide who have purchased so-called "extended warranty" vehicle service contracts from Dealers Warranty LLC (also known as mogi and Federal Auto Protection) and Warranty Finance LLC.

Mr. Sahim is represented in the matter by Steven L. Wittels of Sanford Wittels & Heisler, LLP in New York, along with the Law Offices of Mark S. Baumkel & Associates in Bingham Farms, Michigan, and Michael F. Ram of Ram & Olson, LLP in San Francisco.

The complaint details Warranty's ongoing, wrongful scheme to extract hidden interest charges and penalties from consumers who cancel their service contracts before the term of coverage expires. The complaint charges that the defendants make a practice of heavily penalizing car owners with large interest charges and marketing fees that are not spelled out in their contracts, in violation of the Federal Truth in Lending Act and the Illinois Consumer Fraud Act.

"These Warranty rip-off artists bombard millions of households with calls designed to sell them virtually useless warranty contracts," said lead counsel Steven L. Wittels. "Then, when customers try to cancel their contracts, Warranty pounces on them with exorbitant hidden interest charges, marketing fees, and cancellation penalties. The defendants have defrauded thousands of consumers across the country with these charges, and this case aims to put a stop to their unethical practices."

This is not the first time that these warranty companies have run afoul of the law. According to the complaint, the defendants recently entered a consent decree to stop violating the national "no-call" law after being sued by national phone companies for engaging in mass automated telephone blitzes. Congress also held hearings to investigate these companies' unscrupulous marketing practices.

Mr. Sahim purchased an extended warranty from Dealers Warranty in 2007, agreeing to pay a flat, monthly fee for 60 months of coverage. When he tried to cancel his policy, the companies charged Mr. Sahim hundreds of dollars in hidden fees, totaling 25% of the total value of his warranty policy.

"These charges came out of nowhere," Mr. Sahim said. "My contract said nothing about 'interest' or 'marketing fees,' so I was completely shocked when the company charged me $175 for 'interest' and a $142 'marketing fee." Mr. Sahim added that the company would not provide him with a written explanation for how they had calculated his refund. He found out about these hidden costs only after calling up the company to demand an explanation.

The case seeks class action certification and at least $50 million in relief for all the consumers nationwide who were charged these illegal fees, as well as punitive damages. "The only way consumers can ever hope to recover these deceptive fees is if this case proceeds as a class action," explained Mr. Wittels.

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