BBB study shows complaints about vehicle service contract industry are on the rise

COLUMBIA, Mo. (KMIZ)

A new study by the Better Business Bureau shows complaints against the vehicle service contract industry are on the rise.

For more than 20 years, the St. Louis region has been the "epicenter" for the industry. Companies that work in the St. Louis region usually market the selling of contracts to millions of consumers. Marketing tactics used by some in the industry have been called into question by consumers, law enforcement and regulatory agencies.

According to the study, companies may send something in the mail that states the manufacturer’s service coverage may expire. Some companies also use media and advertisements to promote service contracts. At the same time, some companies have been accused of using robocalls to try and entice future customers.

ABC 17 spoke with a local resident from Centralia who was scammed by one of these tactics. Teresa Craig was looking to fix her jeep when she came across an ad on TV.

"I had seen the ad on TV and I called them and they said I could get a contract for $99," Craig said. "I still have never gotten it fixed and I don't know what to do with it now."

In total Craig lost $100 due to this scam.

"It was frustrating," she said. "I was trying to get my vehicle fixed because I have grandkids I carry back and forth, I was upset."

In BBB's study, they spoke with a man from Branson who told BBB he purchased a contract after seeing a TV commercial, just like Craig. He said the company denied a claim he made a few months after buying the policy and that he had to pay approximately $4,600 out of pocket to have his transmission fixed. He said he eventually canceled the coverage but did not receive a refund.

“Never use them,” the man told BBB. “Stay away from them like the plague.”

In recent years, BBB St. Louis has seen a dramatic increase in complaints filed against VSC companies. From 2018 to 2020, complaints filed against VSC companies located in the St. Louis region nearly tripled, going from 544 in 2018 to 1,402 in 2020.

BBB recommendations to avoid losing money on a vehicle service contract:

• Do your research
• Compare the contract with the manufacturer’s warranty
• Before deciding whether to invest in a vehicle service contract, figure out how much it is going to cost
• Ask questions

There are resources for people who believe they were defrauded by a VSC company that can register complaints through the BBB, the Federal Trade Commission, the State Attorney General's Office, or the U.S. Postal Inspection Service.