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US Fidelis halts sales, faces foreclosure

Sarah Wienke//January 3, 2010//

US Fidelis halts sales, faces foreclosure

Sarah Wienke//January 3, 2010//

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Things aren’t looking too good for Wentzville-based US Fidelis.

The extended auto warranty company announced last week that it has stopped selling service contracts, and the company’s headquarters at the old Belz Mall is facing foreclosure.

The sale of the property at 100 Mall Parkway is set for noon Jan. 14 at the St. Charles County Courts Admin-istration Building. The property owner is Atkinson Realty, and Frontenac Bank is the trustee.

Meanwhile, Missouri Attorney General Chris Koster is working to amend a lawsuit against US Fidelis to include additional allegations of deceptive practices against the company’s owners Darain and Cory Atkinson.

US Fidelis has laid off 900 workers since April, when it boasted about 1,100 employees.

Company spokesman Ken Fields, of the public relations firm Fleishman-Hillard, said in a press release that the company had suspended sales and was focusing on reducing the number of customers who cancel their coverage.

The company blames cancellations on the economy as well as increased criticism regarding the entire industry by the media and consumer advocates.

“As a result, hundreds of good, hard-working people have lost their jobs and the St. Louis area has lost hundreds of millions of dollars in annual economic im-pact that our company provided,” CEO Chris Riley said in the statement. It also stated that the company had a $280 million annual economic impact in Missouri.

Each of the terminated employees has been paid in full for all commissions and compensation due to this point, including a severance amount, the company said.

Though its sales division has been let go, its customer service and account resolution divisions are still fully staffed.

Fields added that the pending foreclosure of the company’s headquarters will in no way affect its customer service or operations.

“No matter what happens with the ownership of the building, we fully expect that US Fidelis and our approximately 200 employees will continue to be based here,” he said.

Wentzville Economic Development Director Bob Swank said that though US Fidelis was one of the city’s top three employers, he’s unsure what impact it might have on the community.

“We always hate to see a business leave, but those were call center jobs,” he said.

General Motors and the Wentzville R-IV School District were the other top employers. Swank said the school district is now probably the top employer in town.

US Fidelis’ legal woes began in March 2008 when then-Attorney General Jay Nixon sued the company for violating telemarketing laws and mailing consumers deceptive letters. Missouri is also part of a multistate investigation of the firm that includes at least 43 state attorneys general.

Koster has also filed lawsuits against 10 other St. Louis area auto service contract marketers in November and December. Six are based in St. Charles County.

The businesses are:

  • National Dealers Warranty Inc., d/b/a/, St. Peters
  • Warranty Activation Head-quarters Inc., d/b/a/ Nationwide Automotive Protection, St. Louis
  • Extended Warranty Corp. Inc., d/b/a/ Key Protection Group, St. Peters
  • Dealers Warranty, d/b/a/ MOGI, St. Charles
  • U.S. Auto Warranty, St. Peters
  • Dealer Warranty Services, St. Charles
  • Carhill Enterprises, d/b/a/ Consumer Protection Services, St. Louis
  • CarSafe, d/b/a Dealer Preferred Warranties, St. Charles
  • Dealership Services, St. Louis
  • Dealership Warranties, St. Louis

According to the attorney general, the businesses marketed what appeared to be extended auto warranties to consumers, though they were actually selling service contracts or automotive additives.

“This extended warranty scam is nothing but a ‘bait and switch’ scheme that preys on consumers’ fears having inadequate vehicle warranty coverage,” Koster said in a statement.

Customers who purchased the service contracts realized later that there were significant limits to the coverage. Many of the contracts contain a 30- to 90-day, 1,000-mile period during which customers can’t make claims because that is considered a “pre-existing condition.”

Meanwhile, their contracts are only fully refundable within the first 30 days, so when they discovered their provider wouldn’t pay the claim and tried to cancel their contract, they were refused refunds.

In some cases, the coverage for the vehicle may soon be less than the price paid by the customer for the contract, according to the suits.

“I believe this warranty business is rampant with fraud, and Missouri continues to be at the heart of this deception,” Koster said. “This office will continue to pursue and prosecute businesses such as these that target unsuspecting, innocent consumers.”

Consumers with complaints about businesses selling extended service contracts are encouraged to contact the attorney general’s office at [email protected] or by calling the Attorney General’s Consumer Protection hotline at 1-800-392-8222.

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