Seller of Motor Vehicle Service Contracts Will Cease Business in New Jersey; Agrees to $810,000 Settlement and to Reimburse Consumers Up to Nearly $200,000
– Direct Buy Associates, Inc., which does business as Direct Buy Auto Warranty ("DBAW"), will stop offering motor vehicle service contracts ("MVSCs") to New Jersey consumers, shut down its New Jersey office within six months, and also reimburse consumers who purchased MVSCs but were not provided the coverage they were promised, under terms of the Final Consent Judgment that resolves a lawsuit filed by the New Jersey Division of Consumer Affairs ("Division").
The Division filed its lawsuit against DBAW in February 2014, alleging that DBAW had violated the New Jersey Consumer Fraud Act, the Regulations Governing General Advertising, the Plain Language Act and the Business Corporations Act through its advertising, offering for sale and sale of MVSCs.
DBAW, which has used a business address in Middlesex County since at least June 2009, advertised that it sold auto warranties and/or extended auto warranties that provided "comprehensive," "bumper-to-bumper" coverage. However, DBAW sold MVSCs, not warranties, and the coverage it offered was limited by numerous and substantial exclusions.
DBAW advertised that consumers who purchased its coverage "would never pay for covered auto repair bills again," that it would "pay 100% of covered repairs" and that there was "no limit on how much we will pay your shops labor rate." To the contrary, the MVSCs provided to consumers by DBAW did not pay for repairs that exceeded the Manufacturers' Suggested Retail Price for motor vehicle parts, or for labor that exceeded the "current national flat rate."
The settlement announced today will provide up to $199,559.75 in restitution to qualifying consumers who purchased MVSCs from DBAW and submitted complaints to the Division. The company was also assessed a $500,000 civil penalty, and it will pay an additional $111,009.41 in reimbursement to the State for its attorneys' fees and investigative costs. Out of the total settlement amount, $400,000 of the civil penalty is suspended but will become due if DBAW violates the terms of the Final Consent Judgment.
"Businesses that engage in deceptive tactics like those alleged here harm New Jersey consumers, violate New Jersey's consumer protection laws, and will not be permitted to do business in the state. This settlement protects New Jersey consumers by prohibiting Direct Buy Auto Warranty from selling contracts to our consumers and by requiring that the shut down its New Jersey business," Acting Attorney General John J. Hoffman said.
DBAW also functioned as administrator of the MVSCs it sold, and in that capacity allegedly engaged in a variety of tactics to deny consumers' claims for repairs. Consumers reported that DBAW denied claims verbally, and that its reasons for issuing a denial changed when consumers made repeated inquiries. Now, under the Final Consent Judgment, DBAW is required to issue written notifications of denials, and the written notification must state the basis for the denial under the MVSC.
"Consumers need to come forward and alert us whenever they believe they have paid for services that they do not ultimately receive. Consumer complaints bring results, as the outcome of this case against Direct Buy Auto Warranty clearly shows," said Steve Lee, Acting Director of the New Jersey Division of Consumer Affairs.
DBAW is required to inform the Division of any consumer complaints it receives during at least the next 12 months and how those complaints were resolved. Any additional complaints directly filed with the Division will be forwarded to the company. Those consumers not satisfied with DBAW's response may choose to arbitrate their complaints before the Division's Alternative Dispute Resolution Unit.
Under the terms of the settlement, DBAW's web site must be revised to state that the company no longer sells MVSCs to New Jersey consumers, and to provide its new business address outside the state, once it shuts down its business operations in New Jersey.
Team Leader Aziza Salikhova of the Division of Consumer Affairs Office of Consumer Protection conducted the investigation.
Deputy Attorney General David M. Reap, assisted by DAG Jeffrey Koziar, in the Division of Law's Consumer Fraud Prosecution Section, represented the State in this action.
Consumers who believe they have been cheated or scammed by a business, or suspect any other form of consumer abuse, can file an
online complaintwith the State Division of Consumer Affairs by visiting its website or by calling 1-800-242-5846 (toll free within New Jersey) or 973-504- 6200.
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