Direct Buy Auto Warrantydirect buy warranty -

MIDDLESEX COUNTY – A company that advertised customers "would never pay for covered auto repairs bills again" has agreed to stop operating in New Jersey within six months and reimburse consumers who purchased motor vehicle service contracts but were not provided the coverage as promised.

The settlement resolves a lawsuit brought by the New Jersey Division of Consumer Affairs last year after Direct Buy Associates Inc, which operates as Direct Buy Auto Warranty, with a business address in the Iselin section of Woodbridge, allegedly 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 motor vehicle service contracts.

Direct Buy Auto Warranty advertised it sold auto warranties and/or extended auto warranties that provided "comprehensive" and "bumper to bumper" coverage. The company, however, sold motor vehicle service contracts, not warranties, and the coverage offered was limited by a number of exclusions.

Eddie Miller, Direct Buy Auto Warranty manager, said the company never advertised "bumper to bumper" coverage.

"Many customers purchase an auto warranty or extended warranty and they think everything is covered, " said Miller, adding that the contract is posted on the company's website, allowing customers to see what they are purchasing before they pay.

In addition, Miller thinks it was an overreaction by the state to force the company to stop operating in New Jersey.

He said the company agreed to the settlement in an effort to avoid costly litigation.

He said of the 270 consumer complaints over nearly four years, 41 were directed to the consumer affairs and the rest were taken from the Better Business Bureau. He said the majority had been resolved by the company before consumer affairs got involved. Of the 43 customers scheduled to receive restitution, Miller said 27 that had already been refunded, canceled or claims paid, so the restitution amount should have been reduced.

"We are striving to make the company better, " said Miller, adding that many of the directives have already been implemented by the company.

According to the New Jersey Division of Consumer Affairs, the company advertised that customers who purchased coverage "would never pay for covered auto repair bills again, " and that it would pay "100 percent of covered repairs" and that there was "no limit on how much we will pay your shops labor rate."

But in reality, the motor vehicle service contracts provided by the company 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 will provide up to $199, 559.75 in restitution to qualifying consumers who purchased the company's motor vehicle service contracts and filed complaints with the consumer affairs division. The company also was 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 the company 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 they shut down its New Jersey business, " Acting Attorney General John J. Hoffman said.

Consumers reported the company denied claims verbally, and that the reasons for issuing a denial changed when consumers made repeated inquiries. Under the settlement, the company is required to issued written notifications of denials and must state the reason for the denial.

Under the settlement, the company will be required to inform the state's consumer affairs office of any 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 the company's response may choose to arbitrate their complaints before the Division's Alternative Dispute Resolution Unit.

Under the terms of the settlement, the company's website must be revised to state the company no longer sells motor vehicle service contracts to New Jersey consumers, and to provide its new business address outside the state, once it shuts down its business operations in New Jersey.

Staff Writer Suzanne Russell: [protected]; [protected]

Jan 29, 2015

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