The owners of a company that sold worthless "auto service contracts" to thousands of Wisconsin consumers have agreed to not do that again here or in 10 other states.
The company went bankrupt last spring and has been the target of investigations for at least the past two years.
Darain and Corey Atkinson, the former owners of bankrupt U.S. Fidelis, are also required to turn over assets to the bankruptcy court, according to the state Department of Justice, which sued the company last April and announced a settlement Monday.
U.S. Fidelis, known as National Auto Warranty Services and Dealer Services, sold overpriced contracts for up to $4,000 to more than 400,000 consumers nationwide — including 6,700 in Wisconsin. The Atkinsons are accused of pocketing $101 million in corporate assets.
According to the St. Louis Post-Dispatch, under the settlement, the Atkinsons would give back to their company about $10.5 million — plus luxury homes, cars, boats and other assets expected to fetch at least $10 million more. The money would be used to pay U.S. Fidelis' creditors, a group that eventually could grow to include hundreds of thousands of its former customers.
The consumer lawsuit includes a litany of illegal consumer marketing techniques attributed to the company, including using deceptive junk mail, illegal telemarketing robocalls and misleading TV ads. The lawsuit claimed, among numerous charges, that the company misled consumers to believe their auto warranties had expired or would soon expire and fooled customers into thinking they were being contacted by a manufacturer or other entity affiliated with their original vehicle warranty. Many consumers who thought they were buying "bumper to bumper" coverage of all major repairs later found the contracts full of exemptions, according to a DOJ statement.
In the settlement, in Dane County Circuit Court, the two deny wrongdoing, but agreed to a list of restrictions on future business efforts.
The settlement's details show the Atkinsons owe Wisconsin more than $2.5 million in civil penalties, assessments and costs related to the investigation and litigation. The 11 states involved in the lawsuit are negotiating with the bankruptcy estate. Any consumer seeking restitution would have to file a claim with the bankruptcy court.
U.S. Fidelis was the nation's No. 1 extended-warranty dealer for autos and a primary NASCAR sponsor before its collapse.