(DES MOINES, Iowa) Attorney General Tom Miller and eleven other state attorneys general today announced an agreement with US Fidelis, a vehicle service contract dealer that routinely misled consumers before shutting down and filing for bankruptcy in 2010.
The agreement, which has been approved by the bankruptcy court, provides $13 million in consumer restitution as well as injunctive relief. This settlement, along with a prior settlement with the service contract obligor Warrantech, creates a $14.1 million Consumer Restitution Fund.
“Through phone calls and through mailings, this company, which had no connection to any vehicle manufacturer, harassed and aggressively deceived Iowa consumers into believing they needed to purchase vehicle warranty contracts,” Miller said. “This restitution fund will help many of those consumers.”
US Fidelis was a Missouri-based business run by two brothers, Darian and Cory Atkinson. At one time, the business was the nation’s largest dealer for vehicle service contracts, but on March 1, 2010, it petitioned for Chapter 11 bankruptcy in the US Bankruptcy Court for the Eastern District of Missouri. The Atkinsons also were criminally indicted in Missouri.
In April 2010, Ohio and eleven other states sued US Fidelis and its owners for a variety of illegal actions stemming from its deceptive junk mail, illegal telemarketing, robo-calls, and misleading TV ads. The states alleged that US Fidelis’s solicitations misled consumers into believing their auto warranties had expired or would soon expire and that they were being contacted by a manufacturer or other entity affiliated with their original vehicle warranty. Many consumers who thought they were purchasing a warranty with “bumper to bumper” coverage later found the contracts full of exemptions.
In November 2010, Miller and the states agreed to settle all claims against the Atkinson brothers if they agreed to turn over their assets to the bankruptcy estate. The Atkinsons were also barred from ever again selling auto service contracts or engaging in telemarketing in Iowa and the other states.
Since 2010, the multistate steering committee has been working with US Fidelis, its creditors, and others involved in the bankruptcy case to reach an all-encompassing settlement that would account for all consumer claims.
That settlement, announced today, establishes a $14.1 million Consumer Restitution Fund to provide compensation to eligible consumers who submit a valid proof of claim with the bankruptcy court. To be considered for restitution, most consumers must file their proof of claim by October 5, 2012. Consumers whose contracts expire after this deadline have additional time.
For additional information about filing a proof of claim, consumers should visit the US Fidelis bankruptcy website at www.usfbankruptcy.com. Consumers may also call the US Fidelis Customer Hotline toll free at 1-877-691-8477 with any questions.
In addition to Iowa, the following states participated in the settlement: Arkansas, Idaho, Kansas, Missouri, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Washington, and Wisconsin.
Each state will file its own consent judgment in its respective state court.
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