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SCIC Response to Consumer Reports Article Regarding Home Warranties

By: Tim Meenan, Service Contract Industry Council Executive Director and General Counsel

Your recent article “Why you should avoid home warranties” does a great disservice to the countless satisfied consumers who have realized tremendous savings thanks to their home warranties, and to the many others who could benefit from them in the future.

Unfortunately, your article uses your long-standing, and oft-expressed, disdain for home service contracts and supports this theme by citing a single bad incident as “proof” that all such contracts are a bad idea.

Service contracts help homeowners avoid unexpected, potentially large repair and service bills, as well as inconvenient wait times for repairs. The (insert number) home warranty companies that are members of the Service Contract Industry Council – which, I would add, does NOT include the company cited in your article – adhere to a strict set of standards designed to protect consumers who place their faith in our industry.

Of the 11 paragraphs in your article, six are specifically about this one bad company and the State of New Jersey’s action against it. The remainder of the article offers nice but impractical advice like “buy reliable products” and “maintain them as the manufacturer recommends.” Not once do you explain why home warranties in general are a bad idea for most consumers (assuming, of course, they avoid this one bad company). In fact, the Service Contract Industry Council just worked with the New Jersey Legislature to pass Senate Bill 854 to enact new, strict requirements for providers of home, auto, and consumer goods contracts. That bill went into effect July 16 of this year, and requires consumer disclosures, company solvency and other strong consumer measures.

Most service contracts provide 24-hour claims service to their customers, with expedited options for emergency situations – and emergencies arise more often than you might think. The typical American family looks to its home service contract twice a year to replace or repair appliances. Better still, most appliance repairs can be done right in the home, making the emergency less disruptive. The service contract can even be transferred when ownership of a covered item changes.

Your use of a single outrageous example to paint an entire industry in a negative light is unfair, inaccurate and unjustified. Quite frankly, most people expect better from Consumer Reports.

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