Don’t Get Caught by This Common, and Costly, Scam

When I was researching this article, I received a call from a scammer trying to lure me into buying an extended auto warranty. No kidding. Fortunately, what I needed to know to identify it as a sham was fresh in my mind. We chatted until I just couldn’t help but roll my eyes and disconnect.

But the caller was smooth. The call underscored why the mother of a friend of mine was scammed in such a way for $5,000.

In her case, scammers not only called but sent official looking letters claiming her “vehicle service contract” was set to expire. Neglecting to replace the coverage, one letter warned, would leave her liable for “any and all repairs.” The kicker — the car is worth less than the scammers collected and has long been out of warranty.

Before you tell yourself you’d never fall for such a scam, the findings of a new study by the Better Business Bureau:

Individuals tend to believe that others are more at risk of being scammed than themselves. They also view scam victims through a distorted lens — as elderly, alone and pitiable, or gullible, unintelligent and worthy of scorn. In fact, earlier research — buttressed by BBB’s survey results — supports an understanding that we are all at risk, and that those most likely to be victimized tend to be younger and better educated.

In short, don’t underestimate the fraudsters.

Through these and other marketplace scams, they bilk unsuspecting consumers for some $50 billion a year, according to the BBB report.

Some are mom-and-pop scam operators, but many are sophisticated and well organized.

To avoid losing your hard-earned cash to a “vehicle service contract” scam or “extended auto warranty” scam, follow these tips:

1. Question the offer upfront

If you receive a telephone call or a letter urging you to call a number to extend an auto warranty or vehicle service contract, don’t do so. Call your auto dealer or auto manufacturer instead. They will tell you if such a warranty extension is a valid offer. Soon after my friend discovered her mother was the victim of a scammer, the auto dealer from which I bought my car sent letters to all of its customers warning them of auto warranty scams. In other words, it’s common, so due diligence should be the rule.

2. Understand third-party warranties

Basically, companies that have no direct relationship to your car dealer or manufacturer offer third-party warranties, warns Edmunds.com. These warranties are generally shady and don’t offer legitimate coverage. Even if the company offers an option to have your car serviced at a dealership, the reimbursement process is often difficult if not impossible, according to Edmunds.

3. Contact the Better Business Bureau

A few decades ago, consumers regularly contacted the Better Business Bureau to ensure a company was legitimate. That’s still a good idea. An editor at Edmunds did just that when she received a letter warning that her vehicle warranty would soon expire. She discovered the company had an “F” rating and was under investigation. You can find out the ratings of companies with which you deal by going to the BBB website.

4. Never provide personal information

That sounds like a no-brainer, but scammers know how to build trust and elicit information. The Federal Communications Commission (FCC) reminds us that anyone making a telephone solicitation call to your home must provide their name/the company name and a phone number where the company can be contacted. Prerecorded calls must contain telephone numbers. Chances are good many such callers and calls don’t supply this information. If that’s the case, file a complaint with the FCC here.

5. Already a victim? Don’t suffer in silence

If you have fallen victim to such a scam, don’t be embarrassed. Many people do. Scammers know what they’re doing and how to bilk people out of money. Last month the Federal Trade Commission (FTC) mailed 5,970 refund checks totaling $4 million to people who paid thousands of dollars for fake “extended auto warranties.” Think you may have been victimized by such a scam? You can file a complaint with the FTC by clicking here. You might end up getting some of your money back.

Have you encountered warranty offers that smelled fishy? Share your experience with us in comments below or on our Facebook page.