On July 19, 2012, Ohio Attorney General Mike DeWine and 11 other state attorneys general announced a $14.1 million Consumer Restitution Fund for customers of US Fidelis, a company that was once the nation’s largest vehicle service contract dealer. The firm filed for bankruptcy in 2010.
The settlement provides significant refunds for customers of US Fidelis, but as the bankruptcy judge acknowledged, the case could have concluded without providing a dime to consumers.
What Went Wrong with US Fidelis
US Fidelis was a Missouri-based business owned by two brothers, Darian and Cory Atkinson. When consumers complained about its business practices, Ohio and other state attorneys general began to investigate the marketing and advertising practices of US Fidelis and similar businesses.
On March 1, 2010, US Fidelis petitioned for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Eastern District of Missouri.
By April 2010, Ohio and 11 other states had sued US Fidelis and the Atkinson brothers for a variety of illegal actions stemming from the business’ deceptive junk mail, telemarketing, robo-calls, and misleading TV ads. The states alleged that US Fidelis’ solicitations misled consumers into believing their auto warranties had expired or would soon expire and that they were being contacted by a manufacturer or other entity affiliated with their original vehicle warranty. Many consumers who thought they were purchasing a warranty with “bumper-to-bumper” coverage later found the contracts full of exemptions.
Details revealed in the bankruptcy case showed that the Atkinsons had taken millions of dollars out of the company. In November 2010, the states agreed to settle their claims against the owners if they agreed to turn over their assets to the bankruptcy estate. The Atkinsons agreed. They also were criminally indicted in Missouri.
What Went Right for Consumers
Since 2010, a multi-state steering committee — including Ohio, Missouri, Texas, and Washington — worked with US Fidelis, its creditors, and others involved in the bankruptcy case to reach an all-encompassing settlement that would address all consumer claims.
Often, when a business files for bankruptcy, customers have difficulty recovering money for products or services they purchased but never received, because individual consumers are in line for money after secured creditors, such as the business’ bank. After secured creditors are paid, there may be little to no money left for consumers or other unsecured creditors.
But thanks to the states’ work in the US Fidelis case, the multi-state settlement and a prior settlement with the service contract provider Warrantech (for which US Fidelis was the marketing company), created a $14.1 million Consumer Restitution Fund to provide compensation to eligible US Fidelis customers.
The bankruptcy judge in the case acknowledged that without the states’ careful negotiations, US Fidelis’ bankruptcy could have left consumers with nothing.
To be considered for restitution, most consumers must file a proof of claim with the bankruptcy court by Oct. 5, 2012. Consumers whose contracts expire after this deadline have additional time.
For additional information or questions about filing a proof of claim, visit the US Fidelis bankruptcy website at www.usfbankruptcy.com
or call the US Fidelis Customer Hotline toll-free at 1-877-691-8477.