Attorney general takes action against auto warranty telemarketers

AUSTIN - Texas Attorney General Greg Abbott today charged three telemarketing firms with participating in an unlawful scheme to sell vehicle service contracts, which were falsely marketed as extended warranties.

The state's lawsuit cites multiple violations of the Texas Deceptive Trade Practices Act (DPTA), the Texas Telemarketing Disclosure and Privacy Act, the Telephone Consumer Protection Act, and the Federal Trade Commission's Telemarketing Sales Rule (TSR).

Two California-based telemarketing firms, SCM Media Inc. and On Point Media Inc., along with a third company, Pacific Guard Warranty LLC of Nevada, are named as defendants in the state's lawsuit. Defendants SCM and On Point are so-called lead generators, which are hired to make solicitation calls on behalf of their clients. State investigators indicate that SCM was hired by Pacific Guard Warranty LLC, as part of a campaign to sell extended vehicle warranties nationwide.

"These defendants are charged with operating a nationwide telephone solicitation scheme that violated multiple state and federal telemarketing laws," Attorney General Abbott said. "Texas law provides important protections that prevent telemarketers from misleading call recipients about the services they are selling. Today's enforcement action shows that the state of Texas will aggressively crack down on telemarketers that violate the law."

According to state investigators, the defendant telemarketing companies used "spoof numbers" to falsify their identities. As a result, recipients' Caller ID devices displayed false numbers when they received calls from the defendants.

The defendants are also charged with misleading call recipients about the status of their vehicle warranties. Recorded calls distributed by the defendants not only claimed that recipients' warranties were "about to expire"-but also that the recipients were receiving their "final call" before their car warranties expire. The state's lawsuit - filed in federal court - alleges that these companies harassed countless Texas consumers through a consistent campaign of deceptive and abusive telemarketing calls to consumers' homes and cellular telephones.

Further, call recipients who spoke with the defendants' sales personnel were not offered extended vehicle warranties on their vehicles. Instead, they were pitched extended vehicle service contracts-not warranties.

The state's enforcement action also indicates that the defendants failed to adequately inform call recipients about the limitations of the extended service contracts they were selling. Specifically, the defendants did not disclose contractual provisions requiring that customers maintain evidence of proper vehicle maintenance and obtain pre-approval of repair facilities. The defendants also failed to reveal that the service contracts limit the amount of coverage provided for any specific repair.

The state is seeking a temporary injunction against the companies to prevent them from:

  • Using spoof numbers;
  • Using an automated telephone dialing system to call cellular telephones;
  • Calling phone numbers listed on the Texas No-Call List; and,
  • Calling Texans using pre-recorded messages without Texans' prior consent.

The state's enforcement action seeks:

  • $500 per violation of the TSR - including $1,500 per knowing violation of the TSR;
  • $1,000 per violation of the Texas No Call Act - including $3,000 per knowing violation of the act;
  • $20,000 per violation of the DTPA; and,
  • Attorneys' fees.