Auto warranty firm told to pay $25M in penalties to Md. customers

Nearly 17,000 people bought service contracts from now-bankrupt U.S. Fidelis

August 04, 2011|By Liz F. Kay, The Baltimore Sun

The consumer protection division of the state attorney general's office has ordered a Missouri corporation and its owners to stop marketing vehicle service contracts and to pay roughly $25 million in penalties and restitution to Maryland customers.

But the company has filed for bankruptcy and its owners are facing felony criminal charges in Missouri that include theft and insurance fraud, so Maryland customers will likely recoup only a small percentage of what they paid, Philip Ziperman, deputy chief of the consumer protection division, said Thursday.

U.S. Fidelis and owners Darain and Cory Atkinson have been ordered to return more than $23.5 million to almost 17,000 Marylanders who purchased extended warranties that the company claimed would provide "bumper to bumper" repair coverage between 2005 and 2010, according to a final order filed this week by the attorney general's consumer protection division.

According to the order, U.S. Fidelis reached customers by telephone or letter and told them that their existing auto warranties were going to expire — but that the company could extend them for payments ranging from $2,000 to $4,000.

In July 2010, the consumer protection division charged that the company had violated the Maryland Consumer Protection Act and Telephone Solicitations Act by exaggerating the extent of coverage and misleading customers about the firm's relationships with vehicle manufacturers.

U.S. Fidelis actually was offering a third-party repair contract with significant limitations and exclusions, the division found.

The company, formerly known as National Auto Warranty Services and Dealer Services, and the Atkinsons also must pay a civil penalty of almost $1.7 million under the order.

A call to U.S. Fidelis was not returned Thursday afternoon.

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