FTC Cracks Down on Car Warranty Robocalls

Robocalls are a scourge and the Federal Trade Commission today took action against them by asking a federal court to shut down companies that have been bombarding consumers with hundreds of millions of allegedly deceptive robocalls in an effort to sell vehicle service contracts.

According to the FTC, the robocalls have prompted tens of thousands of complaints from consumers who are either on the Do Not Call Registry or asked not to be called. Five telephone numbers associated with the defendants have generated a total of 30,000 Do Not Call complaints. Consumers received the robocalls at home, work, and on their cell phones, sometimes several times in one day. Businesses, government offices and even 911 dispatchers also have been subjected to the calls, the FTC said.

The FTC complaint names as defendants Voice Touch and two of its principals, James and Maureen Dunne. It also names a company affiliated with Voice Touch called Network Foundations and a principal in that company, Damian Kohlfeld. The second complaint names Transcontinental Warranty, which sells extended auto warranties, and the company's president and CEO, Christopher Cowart.

In its complaints, the FTC said the companies are operating a massive telemarketing scheme that uses random, pre-recorded phone calls to deceive consumers into thinking that their vehicle's warranty is about to expire. Consumers who respond to the robocalls are pressured to purchase extended service contracts for their vehicles, which the telemarketers falsely portray as an extension of the manufacturer's original warranty.

Specifically the FTC said those who answer the pre-recorded calls hear a message telling them that their vehicle warranty is about to expire and that they should "extend coverage before it is too late." They are told to "press one" to speak to a "warranty specialist." The "specialists" then mislead consumers into believing that their company is affiliated with the dealer or manufacturer of the consumer's vehicle. They try to sell consumers a service contract for between $2,000 and $3,000, which they falsely portray as an extension of the vehicle's original warranty. The seller of extended auto warranties sued by the FTC allegedly took in more than $10 million on the sale of these deceptively marketed service contracts.

In their robocalls, the FTC said the companies dial every phone number within a particular area code and prefix sequentially, without knowing anything about the vehicles of the consumers they call, or whether those consumers' numbers are on the Do Not Call Registry. Consumers who asked that the calls be stopped often were met with "abusive behavior" or were simply hung up on, according to the papers filed with the court.

Some of the defendants used offshore shell corporations to try to avoid scrutiny, and a top officer in the telemarketing company bragged to prospective clients that he could operate outside the law without any chance of being caught by the FTC, the papers stated. This defendant also claimed that he makes 1.8 million dials per day and that he had done more than $40 million worth of dialing for extended warranty companies, including one billion dials on behalf of his largest client, according to the court papers filed by the FTC.

In addition to the robocalls, the FTC charged that the company selling the warranties mails out deceptive postcards to consumers, warning them about the imminent expiration of their auto warranties. The postcards are designed to mislead consumers into believing that they are being contacted by their dealer or manufacturer, and the postcards offer consumers the chance to "renew" their original warranties.

The complaints charge that the defendants' deceptive practices violate the FTC Act, and that the defendants also have violated the FTC's Telemarketing Sales Rule ("TSR") by calling consumers whose numbers were on the National Do Not Call Registry. The complaints further charge that the defendants violate the TSR by calling consumers who previously had asked not to be called; by concealing their phone numbers so they would not show up on caller ID, a practice known as spoofing; by failing to identify themselves to the consumers they called; and by failing to disclose that the call was a sales pitch.

The FTC is asking the court for Temporary Restraining Orders that would halt the illegal practices while the cases proceed, impose an asset freeze on all the defendants, and put two of the corporate defendants under the control of court-appointed receivers. The agency also is seeking a permanent injunction that would force the defendants to give up their ill-gotten gains so they can be used for consumer redress. The FTC said AT&T Mobility and Verizon Wireless helped in the investigation.

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