Developing
10:37 am
Mon December 13, 2010

Feds set to take action against "extended warranty" companies

The first federal  salvo in the legal battle over the sales of extended auto service warranties will be fired by Stephen R. Wigginton, the federal prosecutor for the southern district of Illinois.

Wigginton's office will not say who the charges are against, but the "law enforcement action" targets robo-calls the unnamed company made, not the extended auto service contracts themselves.

Speculation is that U.S. Fidelis, the now-bankrupt company formerly based in Wentzville, is a target. Federal cases can be prosecuted in any district where there is a victim.

The St. Louis Post-Dispatch reported in May that federal prosecutors met with the man currently running the company, and that he had made financial records available to the feds and to state attorneys general.

Eleven states reached an agreement with the U.S. Fidelis in November. According to several news reports, the company agreed not to

  • Telemarket in any of the states that were party to the settlement
  • Market or vehicle service contracts
  • Mislead consumers about the source of a deal
  • Disproportionately target older consumers
  • Sell or provide personal information obtained from customers to another company without consent

Missouri has a separate lawsuit against the company, which includes accusations that the company was unlawfully acting as an insurance company when it sold additive-based warranties.