Service-plan peddler exploits bankruptcy fears

Donna Harris covers automotive retailing for Automotive News
I was just reading through the latest complaint filed by Missouri's attorney general against one of those direct-to-consumer vendors of extended-service plans.

High on the list of grievances is the allegation that the direct marketer misled consumers into thinking it was affiliated with the manufacturer or their dealership. The company referred to the contracts it sold as an “extended warranty plan” -- not an extended service contract -- and promised to “extend your vehicle's original coverage.”

In telemarketing promotions, representatives answered as the “warranty division” -- presumably for an automaker. Direct mail pieces made liberal use of corporate trade names with titles like “Toyota Notification.”

But the pitch that really made me cringe was the letter to Chrysler owners warning: “Your automobile manufacturer has been sold, making the future uncertain. But you may still be eligible to protect yourself with an extended warranty program at significant savings.”

Consumers were already nervous following Chrysler's bankruptcy and rescue by Fiat. This promotion exploited and fed those fears.