CarShield to Pay $10 Million to Settle FTC False Ad Charges (1)

CarShield will pay $10 million to settle charges from the Federal Trade Commission that the company made false claims and inaccurately stated celebrity endorsers were customers in its advertisements.

Missouri-based NRRM LLC, doing business as CarShield, markets and sells vehicle service contracts offering extended protection for car repairs after a manufacturer’s warranty expires. But the contracts haven’t lived up to CarShield’s claims in its advertisements and often leave customers paying for repairs the company assured were covered, according a complaint the Federal Trade Commission filed Wednesday in the US District Court for the Eastern District of Missouri.

CarShield’s celebrity endorsers said they used the company’s service contracts, but this wasn’t true in many cases, according to the complaint. Celebrities in CarShield’s televised commercials included rapper and actor Ice-T, sportscaster Chris Berman, and Los Angeles Dodgers pitcher Walker Buehler.

The company claimed in advertisements that it covered “all repairs and/or repairs to ‘covered’ vehicle systems,” but the contracts include numerous exclusions and conditions that aren’t disclosed to consumers before purchasing them, the FTC said in its complaint.

“Instead of delivering the ‘peace of mind’ promised by its advertisements, CarShield left many consumers with a financial headache,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a press release.

The FTC also charged American Auto Shield LLC, which designs and administers vehicle service contracts, for its role in the alleged scheme. American Auto made over $1 billion in revenue selling vehicle service contracts from September 2019 to November 2022, with CarShield generating about 80% of its sales, according to the complaint.

The companies’ $10 million payment will be used to provide refunds to defrauded customers, the FTC said.

CarShield disagrees with many of the FTC’s assertions, but worked alongside the agency to examine ways to improve communications with customers, the company said in a release.

Its marketing efforts now include additional details about repair coverage, and the company directs potential customers to its website where full plans are easily viewed before purchase, according to the release. CarShield also added 10,000 car repair shops to its network and a concierge system to help customers, and expanded rental car coverage, the company said.

“Finally, we are making very clear that all spokespeople in our ads are actual CarShield customers,” the company said.

Morgan, Lewis & Bockius LLP represents CarShield.

The case is FTC v. NRRM, LLC, E.D. Mo., Docket No. 4:24-cv-01055-SPM, 7/31/24.