Where Do All Those Extended Car Warranty Robocalls Come From?
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Car insurance fraud is not new. For decades, unscrupulous drivers have been exaggerating the extent of injuries or damage caused by accidents in order to receive larger payouts. Other common instances of fraud are perpetuated by car dealerships, who might charge too much for their cars.
However, in recent years, a newer, more sophisticated auto fraud has been on the rise, and that is the extended warranty robocall (insert dramatic sound effect here).
Robocalls are annoying and dangerous.
The rise of car warranty robocalls
If you own a phone, chances are you have received one of these calls. They are sometimes pre-recorded, sometimes not, but are essentially all the same. The scammer will pose as a representative of a real company, often a dealership or insurer, who explains your warranty or insurance is about to expire.
These confidence tricksters play on drivers’ fears about having to pay for repairs out-of-pocket, and promise to cover future repair costs in exchange for a small sum of money now, which is why they ask for your bank details.
Many people can spot these scams a mile off (it’s easy if you don’t own a car), and hang up, but thousands of Americans have been duped into handing over their personal information, and then fall prey to unsanctioned bank withdrawals or identity fraud.
If these calls sound familiar, rest assured you’re not the only one receiving them. In fact, the FCC says the extended warranty is the number one robocall scam operating in America, by a huge and ever-increasing margin.
When did these robocall scams begin?
NPR’s Planet Money podcast recently delved into the background of these scams, and found it all started with two brothers, Darain and Cory Atkinson from St. Louis. Darain had been busted for low-level scams and counterfeiting in the ‘80s and served some prison time. On his release he got a job selling cars.
However, this soon snowballed into a new scam, selling customers extended auto warranties that were massively overpriced and didn’t offer much real coverage. In 2001, the Atkinson brothers went into business together, starting their own auto warranty company, called U.S. Fidelis.
NPR advises these were not warranties at all, as warranties can only be issued by the manufacturer of a product. The product offered by U.S. Fidelis, a promise to repair or replace your parts in the event of a breakdown or accident in exchange for a monthly fee, was more akin to car insurance.
However, insurance companies have to adhere to stringent state regulations, so the brothers rejected this title, and called their product a “vehicle service contract” instead. While the contracts were legal, they were being marketed in a deceptive way, because when push came to shove, they provided very little coverage.
What went wrong for U.S. Fidelis?
The Atkinson brothers attracted thousands of unsuspecting customers, making millions of dollars in the process. When customers got wise to the lack of coverage and called to cancel, U.S. Fidelis would make it extremely difficult to do so.
However, by 2007 their reputation had taken a hit, and in response to declining sales the brothers hired a company to begin robocalls, enabling them to reach a lot more potential customers.
Their new strategy was so aggressive that they made one billion of these robocalls in just 10 months, and began to attract heat for violating “Do Not Call” laws. The brothers were banned from robocalling, which killed their business and forced U.S. Fidelis into bankruptcy.
Liquidators found they had illegally skimmed over one hundred million dollars from the company, and the boys were sent back to jail for consumer fraud, insurance fraud, tax evasion, and stealing.
States tightened the rules governing extended warranties, and in most places, sellers now had to be registered as licensed insurers. The legislation worked and the robocalls dried up. For a while…
How does the warranty robocall scam work now?
As explained by NPR, from 2011 until 2018, there were relatively few robocalls advertising scam warranties, but the peace didn’t last.
Over the last couple of years, extended warranty robocalls have returned with a vengeance, only this time, they are not offering any coverage at all.
They pray on the same concerns as the Atkinson brothers, namely the fear of having to pay exorbitant repair costs should you get into an accident, but unlike the limited coverage being provided by U.S. Fidelis, these new scammers just take your money and run.
These callers are after your bank account number or your Social Security number, which they then use to withdraw cash or steal your identity.
You might assume that only the most gullible members of society fall prey to these robocalls, but the scammers have a new trick up their sleeve. By using records from the DMV or even private dealerships, they often know the exact car you drive.
As a result, by referencing your vehicle model in the call, they appear more credible and are able to convince many savvy individuals into handing over their personal info.
Going a step further, many iterations of the scam offer you cash, in the form of an instant rebate for being a loyal customer, and promise to deposit into your account if you give them your information.
While many of us will realize this is too good to be true, millions of Americans are strapped for cash, and this desperation plays into the scam artists’ hands.
How to protect yourself from scam robocalls
The Federal Communications Commission (FCC) has specific guidelines on steps you can take to protect yourself from scam robocalls.
First of all, never provide any personal information, such as your credit card number, bank account details, driver’s license info, or social security number over the phone, unless you are 100% sure you are dealing directly with a company with which you have an established relationship.
Don’t rely on caller ID to verify the legitimacy of an incoming caller, because scammers may engage in “spoofing,” which falsifies the information sent to your caller ID. Instead, if you believe the call to be genuine, ask for a reference number and advise you will call them back.
Go to the company’s website to find the official number before calling back, and if they acknowledge your reference number, and have a genuine reason for the initial call, you can be confident it is legitimate.
Obviously it is impossible to get a reference number from a robocall. In this case, NPR advises you just hang up the phone, as it is almost certainly a scammer. Don’t press any buttons when they call, as you don’t want them to realize the number belongs to a real person. By simply hanging up, you have a better chance of dissuading them from calling again.
If you suspect you are receiving scam calls, robo or otherwise, you can file a complaint with the FCC. If they can trace the caller, they will issue warnings and impose fines against anyone guilty of making unsolicited calls, as they violate the Telephone Consumer Protection Act.
A good rule of thumb is just to ignore any calls you don’t recognize or aren’t expecting. If it’s really from your car’s manufacturer, dealership, or insurer, they can leave a message, and then you can assess the legitimacy, without the pressure of dealing with it in real time.
Good luck out there!