Stain persists as U.S. Fidelis case winds down -- at last

Jim Henry is a special correspondent for Automotive News

U.S. Fidelis continues to dog the extended-service contract industry, even though the notorious bankruptcy case is winding down to its last few official acts.

Last week, 11 states led by Missouri Attorney General Chris Koster reached a settlement with what’s left of U.S. Fidelis for $14.1 million in restitution for consumers. That’s not much, considering the company, based in Wentzville, Mo., said it had 656,000 customers nationwide when it went out of business in 2010. Divided equally, that’s about $21 each.

The company’s bankruptcy plan creates different classes of consumers. How they are defined shows what kind of scams U.S. Fidelis ran. The company sold extended-service contracts directly to consumers using high-pressure sales tactics, largely over the phone.

First in line are customers with claims for “unauthorized deductions from a bank account.” Then there are customers seeking a refund under the company’s “money-back guarantee.” Next are customers claiming “misrepresentation” and violations of the Do Not Call Registry. If all those get paid in full, there’s an “other” category.

Last, but not least, the two brothers who founded and ran the company, Cory Atkinson and Darain Atkinson, still face sentencing in September, after pleading guilty to fraud charges.

U.S. Fidelis didn’t sell extended-service contracts via dealerships. But the case still leaves consumers with a bad taste.