California Insurance Commissioner Steve Poizner has filed a cease and desist order against two California men and several corporations for allegedly operating unlicensed insurance companies and using deceptive and illegal telemarketing. Robert Lewis Chapman, James C. Sletner and several corporations they own and manage, including SafeData Management Services Inc., d.b.a. Consumer Direct Warranty Services, Warranty Administration Services Inc., and Warranty Administration Solutions Inc., face substantial fines, the Department of Insurance said.
The Department alleges that Consumer Direct sold insurance policies and vehicle service contracts without a license and in disregard for California law. The unlawful insurance policies, which promise to repair breakdowns to engines, transmissions and other parts, typically sell for $1,500 to $2,500, the DOI said. Chapman, Sletner and Consumer Direct each face a fine of $5,000 for every day they conducted business in California, or five times the revenue received from California consumers, whichever is greater.
Chapman, Sletner and Consumer Direct contend their insurance policies are product warranties because they require consumers to put additives in their cars. The additives supposedly protect the car from mechanical breakdowns. The Department of Insurance maintains that the additives have virtually no effect in preventing breakdowns and are a sham to avoid insurance regulation. CDI alleges that Consumer Direct is not licensed to act as an insurance company, lacks the financial capital to do so, and therefore poses a hazard to consumers.
In addition to the licensing violation, Consumer Direct has generated numerous complaints around the country and in California alleging high-pressure and deceptive telemarketing calls, illegal calls to cell phones and people on the Do Not Call list, the DOI said. In addition to these alleged violations, the Department also accuses Consumer Direct of failing to honor claims and failing to properly handle cancellation refund requests.
California residents who have had problems with Consumer Direct Warranty Services, Warranty Administration Services Inc., or Warranty Administration Solutions Inc. are being encouraged to contact the Department of Insurance.
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