UPDATE: 'Robo-calls' dial up senators, spur federal investigation

Tuesday, May 12, 2009 | 11:18 a.m. CDT

WASHINGTON— Federal regulators have been investigating and are close to filing lawsuits against companies believed to be behind a national wave of spam "robocalls" that warn people that their auto warranties are about to expire and that they need to sign up for new service plans.

The Federal Trade Commission has inquiries underway into several companies involved in the deceptive calls, and "law enforcement action in this area can be expected imminently," FTC Chairman Jon Leibowitz said Monday in a letter to Sen. Charles Schumer, D-N.Y.

The FTC also is providing an electronic link on its homepage for consumers to file complaints, Liebowitz said.

Schumer, who spoke Monday with Leibowitz, had asked for an investigation by the agency into what he calls a scam of "robo-dialer harassment." The computerized calls can eat up a consumer's cell phone minutes, possibly jacking up phone charges, he says.

The message saying "your car warranty has expired" already has brought some 300,000 complaints nationwide, according to Schumer. The calls come even if the consumer has signed up for the national Do Not Call registry, which is operated by the FTC.

"Americans deserve to know the government is on their side, and that this harassment won't be overlooked or ignored," Schumer said in a statement Monday to The Associated Press. "This prompt, aggressive action should provide some relief to those besieged by these fraudulent calls."

Schumer and Sen. Mark Warner, D-Va. — who have received the calls themselves — are expected to announce the FTC's actions at a news conference Tuesday.

Liebowitz noted in his letter that such "robocall" or "voiceblasting" phone campaigns may violate a number of telemarketing sales and other FTC rules.

The calls target people regardless of whether they have warranties or even own cars and have become such a nuisance that officials in 40 states are investigating the companies behind them.

The lucrative industry is based largely in the St. Louis area, according to the Better Business Bureau in the city. A group of companies in Missouri in the mid-1990s began offering extended repair warranties to people whose manufacturer-issued warranties were about to expire.

About three dozen companies offer contracts similar to insurance policies, pledging to pay for car repairs in exchange for fees paid up front. They call numbers randomly and leave messages telling people that their auto warranties are about to expire.

Some companies also send out cards that mislead recipients into thinking that their vehicles have been subject to safety recalls.

If people call back and agree to buy policies, the Better Business Bureau says, the companies often don't let them see the contracts until they agree to pay. And some people apparently don't learn until it's too late and they've spent thousands of dollars on deals that don't cover many types of repairs.

Missouri authorities filed a suit last month against one of the largest car-warranty companies, USfidelis Inc., based in Wentzville, charging that company officials ignored a subpoena demanding that they answer questions about their business.

A spokesman for USfidelis said Sunday that there was "some confusion" about the appearance date in the subpoena. The spokesman, Ken Fields, said USfidelis "treats every customer fairly and honestly." The company stopped making unsolicited marketing calls last year and now relies mostly on television advertising, he said.

Associated Press writer Karen Matthews in New York contributed to this report.


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