The Better Business Bureau (BBB) warns consumers to use caution if purchasing a vehicle service contract and carefully read the contract prior to purchase, as a new BBB study finds that complaints against companies in that industry are on the rise.
The in-depth investigative study – Vehicle Service Contract Industry: BBB Study Reveals How This Complex Business Model Leads to Consumer Complaints When Marketers’ Promises Giveth and Administrators Taketh Away – details the history of the VSC in the St. Louis region, the difference between a VSC and a warranty and the problems consumers report having with the product. Read the full vehicle service contract study here.
Different companies have entered and exited the VSC landscape in the St. Louis region since the early 2000s when the contracts started to become popular. Between 2000 and 2020, BBB of Eastern & Southwest Missouri & Southern Illinois processed more than 15,000 complaints against VSC companies in its service area.
Companies that operate in the St. Louis region primarily 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. Some companies utilize U.S. mail to send materials to consumers informing them that their manufacturer’s service coverage may be about to expire. Some companies also use electronic media, television, and radio ads that feature influencers who tout the product and its ease of use to promote the service contracts. Some companies have been accused of using robocalls to bombard unsuspecting consumers with offers for their services.
Consumers have told BBB they believe the mailers and commercials are misleading. Vehicle repairs they believed would be covered under policies purchased through the VSC marketing companies are sometimes later denied by policy administrators, which are separate companies. As a result, consumers may spend hundreds or thousands of dollars on repair costs they thought were covered under their policies, in addition to the VSC coverage cost.
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.
A Branson, Missouri, man told BBB he needed financial help from his church to have his vehicle repaired after a VSC company denied a claim he made. The man said he purchased the contract after seeing a TV commercial. 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 said. “Stay away from them like the plague.”
BBB encourages the industry to be more transparent with its advertising and policies and more active with self-regulatory actions like code of ethics. BBB also would like to see regulatory agencies be more active in prosecuting bad actors.
Regulators may wish to consider making it mandatory for consumers to be given an opportunity to read and review contracts prior to payments being accepted. This would prohibit the use of a telephone “signature.”
Tips on how to avoid losing money on a vehicle service contract:
Resources for those who believe they were defrauded by a VSC company may register complaints at:
