Every step in your extended warranty claims process invites substantial reward — not to mention significant risk. One honest mistake or continual skirting of the law can result in fines and even a permanent industry ban, as seen with American Vehicle Protection.
In fact, non-compliance from multiple parties has eroded consumer trust to the degree that the Federal Trade Commission has been involved in many cases. And Congress has passed legislation to give the matter some teeth.
It’s no surprise, then, that with so many steps, laws and nuances to follow, fulfilling claims can be a stressful undertaking.
Let’s look at some of these regulations, and how Inline CRM and Inline Admin keeps you on the right side of the law.
Extended Warranty Pre-Sale Regulations
Extended warranties are often advertised as a catch-all policy that covers anything and everything under the sun. But nowhere is the fine print more important for you — or frustrating for clients — than detailing the warranty in black and white
We can thank the Magnuson-Moss Warranty Act (15 U.S.C. §§ 2301-2312) of 1975 for the requirement of specifying certain language such as:
- Clear disclosure of terms
- Warranty limitations
- Prohibition of used force for certain parts or providers, unless provided for free
- Service contracts and the rules for disclosure
And that’s just one law!
Extended warranty companies must also adhere to:
- 16 CFR Part 700 (clear cancellation/refund policy}
- 16 CFR Part 701 (clear and conspicuous disclosures of warrantor, claim procedures and consumer rights)
- 16 CFR Part 702 (warranties must be available for inspection prior to sale)
- UCC Article 2 (which mandates implied warranties of merchantability and fitness unless properly disclaimed)
Possible Consequences of Non-Compliance:
- Civil lawsuits
- Fines up to $46,517 (Weber Grill has set this precedent)
- Class action lawsuits
- Prison
- Repayment of plaintiff’s attorney fees
How Inline CRM Helps:
- Pre-built templates with Magnuson-Moss compliant language
- Automatic refund calculations
- Checkpoints at warranty creation
Extended Warranty Communication Regulations
We’ve all experienced an unsolicited call, but extended warranty and service contract providers have a reputation all their own. AT&T even spoofed extended warranty robocalls during March Madness a few years ago, touting their built-in spam detection.
It brought levity to the situation, but the ramifications can be dire if you don’t adhere to the Telephone Consumer Protection Act (TCPA).
Requirements:
- Opt-in for automated calls/texts
- Do-Not-Call (DNC) registry compliance
- Calls must only occur between 8am and 9pm of the recipient’s local time
Potential Consequences:
How Inline CRM Helps:
We integrate within the DNC database to alert you when contacting a number listed within.
Extended Warranty Claim Intake Regulations
So far, we’ve covered pre-sale regulations for the most part.
But just as many post-sale, claim-proper regulations exist.
One of those is complying with the Americans with Disabilities Act (ADA). Your company must provide claimants a variety of filing methods (such as sites and apps that follow Web Content Accessibility Guidelines (WCAG)), call centers with assistive technology, flexible means of submitting documentation and remote assessments.
Potential Consequences:
- Answering a complaint filed with the U.S. Department of Justice
- Fines totaling five or six figures
How Inline Admin Helps:
- Automated acknowledgement of claim receipt (email, SMS)
- Multiple ADA-compliant ways to file a claim
Prompt Payment and Decision Regulations
Some states mandate VSCs or extended warranty companies to approve or deny claims within a specified time. For example:
- In California, claims not specifically disapproved within 30 days in writing are considered approved. Approved claims must be paid within 30 days of approval.
- In Missouri, customers are entitled to a full refund during the “free look” period; a 10% penalty is added if the refund is not paid within 45 days.
Potential Consequences:
- Needless fines
- Interest on delayed payments
How Inline Admin Helps:
- Alerts to ensure no claim lingers in limbo
- Time-stamped documentation
- Integrated payment processing
Extended Warranty Privacy Regulations
You can always get another car or new plumbing system. But your personal data is priceless. And every claim involves personally identifying information for claimants and vendors alike:
- Names
- Addresses
- Payment details
- Communication
- Phone numbers
One flaw in your process, one crack in your security, can lead to near irreparable harm.
Potential Consequences:
- Loss of reputation
- Financial fraud
- Stolen identities
How Inline Admin Helps:
Our company is SOC-2 certified, which means we adhere to the most demanding data security standards.
Extended Warranty Documentation Regulations
There is no “hard and set” rule for how long warranty companies need to retain documents, as this varies by state, jurisdiction and product type. However, there are best practices your company should follow:
- The Four-Year Rule. Under the Uniform Commercial Code (UCC), warranty claims typically follow a four-year statute of limitations. Keeping records for four years after the warranty period is a sensible approach.
- The 10-Year Window. The National Highway Traffic Safety Administration (NHTSA) requires manufacturers to retain records for safety defects and recalls for 10 years.
Possible Consequences:
Lackluster documentation or record keeping can lead to disputed denials in your client’s favor — a significant sum, especially when you manage any volume of claims.
How Inline Admin Helps:
- Integrated document management
- Visibility into every claim’s history, forever
- Unified payment and transaction history
Extended Warranty Financial Reserve Requirements
Multiple state-level regulations, such as the National Home Service Contract Association (NHSCA) Model Act or the Third-Party Administrator Statute within the National Association of Insurance Commissioners (NAIC) mandate a funded reserve account (e.g. 40% of the funding for a service contract, minus claims paid).
These funds must be held in a state trust — and non-compliance leads to ruinous outcomes.
Possible Consequences (Depending on State):
- Suspension or revocation of provider’s license
- Cease-and-desist orders
- Increased financial examinations and scutiny
How Inline Admin Helps:
- Unlimited funding buckets
- Fraudulent payout prevention
- Financial reporting to optimize reserve levels
Could Compliance Be Your Competitive Advantage?
There will always be new regulations and changes to existing regulations. Choosing an administrative platform that has air-tight compliance built in can mean the literal difference between staying profitable, not to mention staying out of jail.
Inline Data Systems lessens your liability during every step of the claims management process. Schedule a free demo of our extended warranty admin and CRM solutions to see how.
