Nat Pope has spent much of his academic career studying extended car warranties, such as those seen on television and pushed in robocalls promising to pay for costly repairs. But here’s what he still doesn’t know: Who can help if there’s a problem with the warranty?

“I wouldn’t even know where I would really expect to get some satisfaction,” said Pope, an associate professor of risk management and insurance at the University of North Texas. “The regulation is fragmented. There is nothing national. Regulators have other fish to fry.”

That’s a problem because such contracts — properly called vehicle service contracts — are “fraught with peril for consumers, especially economically vulnerable people who can’t afford to have their car break down,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety.

“Many consumers are complaining of high pressure, misrepresentations, contracts not being fulfilled, refunds not provided and overall just poor customer service,” said Michelle L. Corey, president of the Better Business Bureau of Greater St. Louis. Corey said the BBB seemed to receive fewer complaints about policies sold by dealers and automakers.

In the worst case, telemarketers are just collecting money. “There is no warranty, it is just a flat-out scam,” said Chad M. Canfield, an official with the Michigan attorney general’s office. “We are in the process of some multistate actions to shut those people down.”

Any problems are being caused by a few companies, according to the Service Contract Industry Council, a trade association whose members include some automakers. Its website says that the “vast majority” of warranties are from “reputable, licensed companies that abide by current regulations.”


But the trade group also warns consumers “to be cautious when dealing with providers who use unsolicited mass marketing techniques, such as direct mail and telemarketing.”

“There are large amounts of offshore, illegal robocall operations totally designed to get people’s credit card numbers,” said Timothy J. Meenan, executive director of the council. “They are not our members. They are scam operations.”

Brittney Latham of Louisville, Kentucky, knows about those robocalls. “I got a phone call one morning from a really nice lady. Just the sweetest thing. They were going to do this and that and the other. It was just guaranteed and blah, blah, blah,” Latham said.

As a single mother with one child, she worried about an unexpected repair on her 6-year-old car and signed up with Driver’s Protection of St. Louis. “She fooled me. I bought it,” she said.

After she paid about $2,000 in premiums, the car’s check-engine light came on. She was pleased that she had the policy because the engine was supposed to be covered. But the company said that the specific engine parts needed were not listed in the contract. So she took out a $550 loan to get her car fixed. The company did not respond to her request for a refund. Officials at Driver’s Protection could not be reached at the company’s phone number or through its Facebook page.

More and more customers like Latham are interested in vehicle service contracts. The business is expected to grow to involve billions of dollars in sales, according to a 2019 report by Colonnade Advisors, an investment banking firm based in Florida.


The reason for the growth: People are keeping their vehicles longer, and they worry about repair costs — particularly during the pandemic. “The last thing people wanted to do was taking public transportation or being without a vehicle,” said Gina Cocking, Colonnade’s CEO. “Having a vehicle service contract was a pitch that resonated with a lot of people.”

Service contracts are also becoming more familiar, Cocking said. People buy them for smartphones and refrigerators and increasingly see them on television. “Those commercials are coming on all the time. When you see those, it starts to normalize the product,” she said.

While business is increasing, so are complaints, according to the BBB. In 2019, the Better Business Bureau in the United States and Canada got about 6,700 complaints about companies offering service contracts. Last year, that increased 21% to almost 8,200.

That may not seem like a large number nationwide, but a small number of complaints is not necessarily a gauge of consumer satisfaction, said Amy J. Schmitz, a law professor at the University of Missouri, where she specializes in consumer protection. A 2004 survey by the Federal Trade Commission found that only about 8% of unhappy consumers filed complaints with state or federal officials.

“It is hard to complain,” said Schmitz. “Some people may not have the background or feel competent or comfortable, or know how.”

Policies can cost thousands of dollars, and consumers believe they are getting bumper-to-bumper coverage when they hear claims such as “100% of covered repairs are paid,” Corey said. But she says that is misleading because many things are not covered.


Cocking said a common complaint she had seen through her firm’s work with vehicle service contract companies was customers who had a mechanical problem, bought an extended warranty to get it fixed, then became angry when they discovered that the preexisting condition was not covered.

“Our lives are covered in fine print,” she said. “If the consumer is not reading the contract, that is a problem.”

Years ago, there were some problematic companies, Cocking said, but that has changed. “These companies are becoming too big and too well-known” to defraud customers, she said. “That is not a profitable way to grow in the long-term.”

Vehicle service contracts have a long, sometimes checkered, history.

In 1995 the National Association of Insurance Commissioners created a model act for states to consider. The idea was to regulate all service contracts, covering items as varied as refrigerators and automobiles. The act recommended requiring companies to use “clear, understandable language” and to prove adequate financial backing to pay for repairs.

But few states adopted the act. A 2014 survey, the most recent data available, by the association found that only eight states had passed “substantially similar” bills.

“I can’t believe this model act has done anything positive for the consumer,” said Pope of the University of North Texas. “The reality is that it has been sporadically adopted and even more sporadically enforced.”


Even if states didn’t adopt the model act, many put in place tougher laws protecting consumers, said Meenan of the Service Contract Industry Council.

But the extent of state regulations and the vigor of enforcement varies, Pope said.

“It is all fragmented, and trying to get a consistent consensus at this point as to who is doing what is very difficult,” he said.

Consequently, for consumers who feel they were wronged, getting help from state or federal officials may be difficult. One issue is resources.

In Michigan, vehicle service contracts are “certainly an issue, but not the biggest issue that we see,” Canfield said. So, if there is a single complaint, officials would try mediation. If that didn’t work, the state would suggest that the consumer go to small-claims court.

“We have limited resources. If you are a one-off, we are not able to do as much as we would as if we see 10 complaints,” he said.


As for federal regulation, it has been more than a decade since the Federal Trade Commission took action against a company selling vehicle service contracts.

Consumers who try to resolve issues themselves can also be a disadvantage because several companies are typically involved. One company may sell the policy while another makes a decision on whether to cover a repair.

“Often consumers are bounced back and forth trying to get a resolution to their problem. It is total confusion,” Corey said.

Schmitz said it is important to read the contract carefully before buying and to research the history of the company and look for complaints. Also, consider the cost of the policy compared with possible repairs. And make sure the vehicle service contract isn’t in effect at the same time as the warranty from the automaker.

“Usually, it is not going to be worth it,” she said.

A 2013 reader survey by Consumer Reports said that “55% of owners who purchased an extended warranty hadn’t used it for repairs during the lifetime of the policy. Only about a quarter of respondents said they would definitely get it again.”


Consumer Reports advised those who willing to spend the money for piece of mind to negotiate hard, read the small print and “purchase one from a company with a long history, such as through an automaker.”

Pope says the important thing for consumers to understand is that if they have a problem, there is no guarantee of help.

“I’ve seen no white knight step up to the plate,” he said.

File a complaint

In Washington state, consumers can file a complaint about a business with the Office of the Attorney General at