A national scam practiced by some in the vehicle service contract industry has bilked millions of dollars out of consumers. The consumers think they are getting a warranty sanctioned by the auto manufacturer. What most of them got was a worthless piece of paper.

The BBB in St. Louis undertook a study of the industry because of the large number of complaints filed with that BBB. The study included a survey of 660 complainants across the country.

The study pointed out that the multi-tiered industry --- sellers, providers, administrators, insurers and financing entities --- cause confusion among consumers. It notes that 64% of respondents to the survey said they did not know the name of the provider of the contract who was responsible for paying claims and 16% thought the provider was the insuring company.

The survey revealed that 92% of respondents felt that the company’s selling tactics were misleading or otherwise improper. While telephone calls accounted for 28% of the first contact with the company, a like number of consumers said they called a company because of TV or radio advertising. Thirty-one percent said they responded to a mail solicitation.

Once a contract was accepted and payments begun or completed, 93% of consumers surveyed said the companies refused to allow claims that they thought were covered by the contract. The average amount consumers spent for those “uncovered” repairs was $1,480, the study notes.

Tips to consider before buying these types of warranties are:

• Read the contract carefully. Know what is covered and not covered and under what conditions. If the seller won’t provide a contract, don’t buy it.
• Do the arithmetic. The cost of a contract can be more than the car’s value.
• Ask the seller the names and locations of the providers, administrators and insurers. Ask how claims are processed.
• Check all companies involved in the contract with the BBB at www.bbb.org.