MINNEAPOLIS (CN) – Minnesota’s attorney general claims a Texas company tricked senior citizens into buying service contracts by portraying itself as a manufacturer or dealer and falsely stating their car warranties were expired.
Assistant Attorney General Eric Malone, on behalf of Attorney General Lori Swanson, filed the lawsuit Friday in Hennepin County District Court against AutoAssure LLC doing business as Vehicle Service Department, alleging false and deceptive marketing practices in violation of state consumer-protection laws. The complaint was not made available by the court until Monday.
“In sales calls, AutoAssure further misrepresented that the service contracts it sold would cover, for example, ‘everything from the front of your [vehicle], all the way to the rear.’ In truth, AutoAssure was not associated with any vehicle manufacturer or dealer, and sold third-party repair coverage that was effective only if the repair did not fall within one of as many as over 40 paragraphs of exclusions,” the 37-page complaint states.
According to the lawsuit, Texas-based AutoAssure started in 2010 and has made over $1.5 million by selling more than 950 service contracts in Minnesota since 2012, despite not being registered to do business there. The service contracts allegedly cost about $3,200 on average but can go for over $6,000.
AutoAssure allegedly marketed and sold the service contracts through direct mailers to potential customers urging them to call the company.
Some of the mailers “contained recipients’ personal and vehicle information, including year, make and model” and warned of “automotive coverage expiration,” saying the warranty on the recipient’s vehicle “is expiring or has expired,” according to the complaint.
The lawsuit claims AutoAssure urged customers to call to get extended coverage and also advertised on its website, which tells visitors to “protect yourself & your car.”
“When your vehicle’s factory warranty expires, you're in charge of fixing any mechanical breakdowns that may occur. That could mean spending large sums of money on auto repairs. AutoAssure provides protection from those high expenses. Our comprehensive vehicle service contract programs will pay your shop or mechanic directly for parts and labor,” the website states.
The company allegedly offers two types of service contracts: a “name component” agreement that covered car parts identified in the terms of the contract, and an “exclusionary” contract that covered any parts and repairs not excluded by the terms of the agreement.
“Even if a part in need of repair fell within the list of parts covered by a given service contract, the contract would still not cover such a repair if one of the contract’s numerous exclusions applied,” the lawsuit states.
Minnesota officials claim one service contract had 41 paragraphs of exclusions that took up over 25 percent of the contract’s pages. The exclusions allegedly included parts such as exhaust and emissions systems, carburetors, bumpers, airbags and other safety and restraint systems.
The lawsuit details several customers experiences with the company, including that of a 79-year-old Minnesotan who received a confusing mailer advising him to extend repair coverage for a car that had been totaled a year before.
AG Swanson filed a similar lawsuit in 2016 against another service contract seller, United Auto Defense, which was founded by a former AutoAssure general manager, according to Friday’s complaint. The company agreed to a permanent ban on doing business in Minnesota and paid $270,000 in civil penalties and restitution for allegedly deceptive sales practices.
Swanson seeks a similar outcome in the latest case and wants a judge to declare that AutoAssure engaged in deceptive marketing practices and order it to “undertake remedial actions” including restitution, civil penalties and attorney fees.
“Due to the fraudulent, deceptive and misleading conduct, representations and omissions described in this complaint, Minnesota consumers made payments to AutoAssure and other parties for goods and/or services that they otherwise would not have purchased, thereby causing harm to said person and enriching AutoAssure,” the lawsuit states.
Rick Burton, on behalf of AutoAssure, said the claims are meritless in an email Wednesday.
“AutoAssure has been in regular discussions with the attorney general's office for the past four years over very minor issues. It was our understanding all questions about our company had been satisfactorily resolved," Burton said. "AutoAssure has been in business for nearly 10 years and looks forward to vigorously contesting any claim asserted by the Minnesota Attorney General.”
Swanson’s office did not mmediately respond Tuesday to an email request for comment.
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