Credexx, a nation-wide company accused of blitzing consumers with deceptive junk mail, illegal robocalls and misleading TV ads, signed a settlement that bans it and former owner David J. Tabb from doing business in Washington state.
"Credexx was one of several companies that tricked consumers nationwide into buying expensive auto service contracts by claiming to extend manufacturer-provided warranties," Washington Attorney General Rob McKenna said in a statement.
The attorney general's lawsuit alleged that Credexx, doing business as Auto One Warranty Specialists, sold at least 1,340 vehicle service contracts and protection products to Washington consumers, who apparently didn't receive the "bumper to bumper" coverage promised.
One consumer said she paid $1,833 for coverage for a 2007 Prius, only to discover the contract didn't cover the cost of replacing the battery pack, the Washington Attorney General's Office said.
Another consumer was sold a plan that would cover his truck, but discovered in the fine print that his vehicle was exempted because of its trailer hitch and other towing modifications. A third consumer with transmission problems said the company failed to disclose significant limits on the cost of repairs.
Credexx also was accused of calling consumers on the national Do Not Call registry, making "robocalls," bypassing caller ID, refusing to allow consumers an opportunity to review contracts, denying valid refund requests, improperly obtaining consumers' personal information and violating state licensing and registration laws.
Tabb will pay $5,000 to reimburse the state for its investigation and legal costs. A $70,000 penalty will be suspended if he complies with the settlement. McKenna said the payment is small because Credexx is defunct and Tabb is broke. He agreed not to do business in Washington again, McKenna added.
Tabb's attorney did not respond to calls for comment.
Washington is among five states that have sued Credexx over its business practices.
Under federal law, a "factory warranty" or "extended warranty" can only be offered and sold by an automobile manufacturer. Other plans are called service contracts.
When buying an auto service contract, the Federal Trade Commission warns consumers to find out who backs the service contract, how much it costs, what's covered, how claims are handled, what kind of parts will be used, and the contract's length. For more information, see the FTC's "Auto Service Contracts."
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Credexx Settles Accusations It Sold Worthless Service Contracts