September. 5, 2008
Attorney General Corbett announces consumer protection lawsuit against California company over vehicle warranty scheme
HARRISBURG - Attorney General Tom Corbett today announced the filing of a consumer protection lawsuit against a California man and his company, accused of failing to pay consumers who had purchased special "no claim bonus" contracts as part of the warranty coverage for their new or used vehicles.
Corbett identified the defendant as Shafiq Hasan, 26165 Brindlewood Drive, Laguna Hills, California, operating as Pro-Guard International, 26061 Merit Circle, Laguna Hills.
Corbett said that Hasan and Pro-Guard sold various vehicle warranties and service contracts to Pennsylvania consumers through car dealerships located in Bucks and Lehigh counties. Included in many of these contracts was a so-called "no claim bonus," which would supposedly repay consumers the cost of their vehicle warranty, up to $2,500, if they did not file any claims during the entire length of the warranty.
"Consumers purchased the Pro-Guard warranties, believing that they were protecting their vehicles, and also paid extra for the 'no claim bonus,' with the promise that they would get their money back if they did not file any warranty claims," Corbett said. "Instead, consumers have been left with worthless warranties and empty promises about refunds."
According to the lawsuit, Pro-Guard did not to honor the terms of the no claim bonuses contracts and failed to refund the warranty purchase price for consumers who submitted valid claims. Pro-Guard is also accused of trying to impose additional terms and conditions on consumers, in an effort to avoid paying refunds, and setting unreasonably short claims deadlines, making it extremely difficult for consumers to comply with the claims process.
Corbett said that Hasan and Pro-Guard are also accused of falsely claiming that all of the money received for the sale of these warranty contracts would be placed in a secure escrow account, controlled by a third-party. In reality, Hasan allegedly cancelled the independent administration of the account and personally took control of the account.
Additionally, the lawsuit claims that Hasan failed to ensure that his business would set aside enough funds to be able to pay all future consumer claims. By creating a scheme where "no claim bonus" contracts were sold for between $94 and $104, but allowing a maximum pay-out of up to $2,500 (based on the full price of the warranty or service contract), Hasan's business model allegedly only set aside approximately 10% of the funds that would be needed to pay all consumer claims.
Corbett said the consumer protection lawsuit seeks the following:
- Full restitution for all consumers who suffered losses as the result of the actions of Hasan and Pro-Guard.
- Civil penalties of up to $1,000 per violation, or up to $3,000 for each violation involving a senior citizen.
- A court order prohibiting Hasan or Pro-Guard from doing business in Pennsylvania until all restitution and penalties have been paid.
- A requirement that Hasan and Pro-Guard provide formal written notice to the Attorney General's Bureau of Consumer Protection before engaging in any future business in Pennsylvania.
Corbett said that consumers with questions or complaints involving warranties or "no claim bonus" contracts sold in Pennsylvania by Pro-Guard International are urged to contact the Attorney General's Consumer Protection Hotline, at 1-800-441-2555, or file an online complaint using the Attorney General's website: www.attorneygeneral.gov (Highlight the "Complaints" button on the front page of the website and select "Consumer Complaints" from the menu).
The lawsuit was filed in Bucks County by Deputy Attorney General Sarah A. E. Frasch and Senior Deputy Attorney General Henry Hart III, from the Attorney General's Bureau of Consumer Protection.
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