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Former U.S. Fidelis Owners Barred From Telemarketing or Selling Auto Service Contracts in 11 States

 

Attorneys General Settle With Atkinson Brothers

 

MADISONAttorney General J.B. Van Hollen announced today a settlement with the former owners of U.S. Fidelis. The settlement ensures that the founders and owners of U.S. Fidelis, Missouri residents and brothers Darain and Cory Atkinson, will never again sell auto service contracts or telemarket in 11 states, including Wisconsin. The agreement also restricts how the duo advertises any other product or service and requires them to turn over nearly all of their assets to the bankruptcy court handling the dissolution of U.S. Fidelis.

 

U.S. Fidelis, which operated as National Auto Warranty Services and Dealer Services until its bankruptcy last spring, sold more than 400,000 consumers nationwide overpriced service contracts that were sold through illegal and deceptive means. Darain and Cory Atkinson are accused of plundering $101 million in corporate assets for their own personal gain.

 

Attorney General Van Hollen stated “the Atkinsons bombarded Wisconsin residents with illegal robo-calls and deceptive mailings, and unfortunately persuaded numerous Wisconsin residents to purchase their auto service contracts. I am pleased that, through our concerted action with other states, we were able to halt their fraudulent sales practices in Wisconsin and elsewhere.”

 

Attorney General Van Hollen, along with Attorneys General from ten other states, sued the defunct company and the Atkinsons shortly after March 2010. The states accused the defendants of a variety of illegal actions stemming from deceptive junk mail, illegal telemarketing robocalls and misleading TV ads. They alleged the company's solicitations misled consumers to believe their auto warranties had expired or would soon expire and confused customers into thinking that they were being contacted by a manufacturer or other entity affiliated with their original vehicle warranty. Many consumers who were led to believe they were purchasing a warranty providing “bumper to bumper” coverage of all major repairs later found the contracts full of exemptions.

 

The states also accused the defendants of violating Do-Not-Call laws and using technology to bypass caller ID and mask the origin of sales calls, refusing to allow consumers an opportunity to review the complete written service contracts, denying valid refund requests, improperly obtaining consumers' personal information and violating state licensing and registration laws.

 

Wisconsin filed the settlement documents today in Dane County Circuit Court. The Atkinsons denied any wrongdoing but agreed to surrender at least 90 percent of their assets pursuant to a related bankruptcy agreement, including assets from 20 related corporations. The settlement also requires the Atkinsons to comply with a lengthy list of restrictions on future business and marketing practices. Specifically, they are prohibited from:

 

· Telemarketing in any of the participating states.

 

· Marketing or selling motor vehicle service contracts (unless employed at a dealership, and then only in connection with the sale of a specific vehicle).

 

· Misleading consumers about the source of an offer.

 

· Misrepresenting their relationship with a consumer.

 

· Representing that an offer is “exclusive” or “final” unless it can be substantiated in writing.

 

· Disproportionately targeting elderly consumers.

 

· Selling or providing personal information obtained from a consumer to unaffiliated companies for marketing purposes without the consumer's consent.

 

The Atkinsons owe the State of Wisconsin $2,539,363 in civil penalties and assessments, as well as $13,000 for costs related to the investigation and litigation. With the surrender of their assets, any recovery will come from the U.S. Fidelis bankruptcy. The states continue to negotiate with the bankruptcy estate to benefit creditors and consumers.

 

In addition to Wisconsin, the following states participated in the settlement: Arkansas, Idaho, Iowa, Kansas, North Carolina, Ohio, Oregon, Pennsylvania, Texas, and Washington.

 

Federal investigators continue probing whether U.S. Fidelis committed any criminal wrongdoing.

 

Copies of the Consent Judgments are available at:

 

2010 file: