New Jersey Acting Attorney General John Hoffman reached a $810,000 settlement with Direct Buy Auto Warranty over allegations that it misled consumers who purchased vehicle service contracts and then didn't provide the promised services.
The company allegedly violated the New Jersey Consumer Fraud Act, the Plain Language Act, the Corporations Act and the Regulations Governing General Advertising by selling consumers what it said were comprehensive auto warranties that would pay for all covered repairs.
In reality, Hoffman's office said Direct Buy was selling service contracts with numerous exclusions that meant consumers had to pay for most repairs.
Under the settlement, Direct Buy will pay $199,559.75 to consumers who bought the warranty plans. The company owners also will also pay a $500,000 civil fee, as well as a $111,009.41 fee to the state for the cost of the lawsuit. In addition, the company must shut down its business in New Jersey within six months.
“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,” Hoffman said. "This settlement protects New Jersey consumers by prohibiting Direct Buy Auto Warranty from selling contracts to our consumers and by requiring that (the company) shut down its New Jersey business.”