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Consumer advocates warn service contracts usually are not a bargain for appliances, home maintenance
By McNelly Torres
South Florida Sun-Sentinel
Published on Monday, Jun 16, 2008
Martha Schiebelhuth thought she was making a good investment when she signed a service contract with a South Florida company last year for home and appliance repairs.
For $275, AtlasServices promised to repair future electrical and plumbing problems, and maintain her home appliances or even replace them, if necessary. It was an offer the 70-year-old west of Boca Raton resident felt could save her hundreds or thousands of dollars on bills.
But last October, Schiebelhuth canceled the contract after she was unable to resolve a protracted billing dispute with Atlas. She decided to distribute about 1,000 fliers in her neighborhood to warn others about the company, noting Atlas has been the subject of numerous complaints with the Better Business Bureau.
''I felt like a senior advocate,'' said Schiebelhuth. ''If I saved five people from the same aggravation I went through, I was doing something good.''
Atlas President Kimberly Grossman and attorney Andrew M. Schwartz said the company has done nothing wrong and that many complaints are unfounded.
''We make an effort to deal with complaints in a timely manner,'' Schwartz said, ''not just because we want to do so but because we are required to do so.''
Consumer advocates say Schiebelhuth's case underscores a hard reality many homeowners discover the hard way: Extended warranty and service contracts for appliance repairs and home maintenance are often a bad deal that can end up costing more than they are worth.
A nationwide survey conducted this year by Angie's List, a consumer-membership Web site, found that home warranty or service contract companies were the leading source of subscriber complaints.
And surveys conducted by Consumer Reports magazine show that extended warranties tend to cost consumers more than the average repair of an appliance.
What's more, experts say paying money for services that you might never need is not a good idea. A better option: Determine the best option after looking into the manufacturer's or retailer's warranty offers, and pay home repairs only when needed.
''Most people never use [warranties after] the manufacturer's warranty runs out,'' said Mark Kotkin, director of survey research for Consumer Reports National Research Center. ''Odds are that you are not going to get anything out of [an extended-warranty contract].'' Experts said such contracts might make sense in some cases, but only for older, expensive appliances such as air conditioning units and new products like flat-screen televisions.
Art J. Chartrand, general counsel to the National Home Services Contract Association, a trade group, said service contracts are convenient but not for everybody. ''Today people don't live in the same place for a long time,'' Chartrand said.
''So they don't develop a relationship with an electrician or plumber.''
Chris Hall, president of RepairClinic.com an Internet company that provides do-it-yourself advice guidance and products for appliances said consumers should research the costs first. ''Before you sign a contract, you need to ask yourself: Am I getting the value of this?'' Hall said.
Schiebelhuth canceled her contract with Atlas last October after the firm billed her $69 to install a light switch in her kitchen work she said she didn't request.
Schiebelhuth said she disputed the bill, but got no response. She mailed two letters canceling the contract and filed complaints with the Department of Financial Services and Better Business Bureau. The bureau mediated the case and she got a $53.46 refund.
Schiebelhuth refuses to cash the check dated Nov. 14, 2007 because she believes she was overcharged for the kitchen light switch repair and should be refunded her $275. ''It is not about the money,'' Schiebelhuth said. ''It is about my integrity. I feel that they should not have been able to get away with this.''
But Schwartz said the refund was fair in light of her contract.
Contracts vary
An extended warranty for appliances such as those sold at Best Buy, Sears and Lowes is typically designed to protect consumers against any manufacturing defects beyond the life of the manufacturer's warranty. A home service contract offers protection for repairs, and replacement of appliances in addition to plumbing and electrical systems.
Costs for these services vary but a one-year service contract typically ranges from $200 to $500 to cover appliances such as refrigerators, stoves, furnaces and air conditioning systems. A service charge, often less than $100, is typically assessed for each call.
But like warranties and insurance for many products, service contracts cover some things while excluding others. That's why consumers need to read any contract carefully before signing to be sure they know what it covers.
Experts said preventive maintenance will extend the lifetime of appliances.
Martha Schiebelhuth thought she was making a good investment when she signed a service contract with a South Florida company last year for home and appliance repairs.
Get the full article here.

