Two former executives of Transcontinental Warranty Inc., a Florida company that sold extended-service contracts directly to consumers, were each sentenced to five years in jail for fraud and misleading sales practices.

Christopher D. Cowart, 50, president of Transcontinental, and Cris D. Sagnelli, 46, vice president, were sentenced on Oct. 31. In addition to the jail terms, they were sentenced to another five years of post-release supervision and fined $15,000 each, reported Automotive News.

The pair pleaded guilty in December 2010. The company is effectively out of business and stopped writing new contracts since 2009, a prosecutor said.

Direct-to-consumer sales potentially take business away from dealerships that sell extended-service contracts, according to the Service Contract Industry Council, a trade group based in Tallahassee, Fla.

Fraud cases also may hurt the reputation of extended-service contracts in general, the group said. There have been several other cases, including the high-profile bankruptcy last year of another direct marketer, U.S. Fidelis in Wentzville, Mo. A couple of former U.S. Fidelis executives also have been indicted on criminal charges.

According to court documents, automated “robo calls” from Transcontinental reached the attorney general of Indiana, a U.S. senator (on his personal cell phone), consumers who had registered on the “Do Not Call” list, and thousands of consumers and businesses who didn’t even own cars.

Transcontinental often misled consumers into thinking they were dealing with the manufacturer that made their car, a prosecutor said.

Many consumers believed they were somehow “reinstating” or extending the original-equipment warranty, when in fact they were buying an extended-service contract from an unrelated third party, court documents said.

Prosecutors said millions of consumers received phone calls from Transcontinental, and “tens of thousands” of customers bought contracts as a result of the deceptive sales pitch, from a generic-sounding “Warranty Service Center.”

CHICAGO – Virginia Surety Company, Inc. has reached an agreement with Interstate National Dealer Services, Inc. to provide underwriting and actuarial support for specific extended service contract programs.

“We’re looking forward to our partnership with Interstate,” said Mike Frosch, senior vice president of VSC. “Virginia Surety’s deep expertise in underwriting automotive, powersport, marine and recreational vehicle service contracts matched with Interstate’s innovative product offerings will benefit agents, dealers, financial institutions and their customers.”

“A partnership with Virginia Surety is a natural pairing for Interstate,” added Interstate CEO Shaun Fetherston. “They are a respected industry leader and share our intense passion for service excellence and superior value with innovative and market-driven products and services.”

VSC and Interstate are providers of consumer benefit programs that promote loyalty and customer satisfaction throughout the ownership experience. Virginia Surety is a wholly-owned subsidiary of The Warranty Group, Inc.

Vehicle service contract providers have long known the value of the finance department of dealerships, but many now realize they shouldn’t put all their eggs in one basket. Customers are willing to consider ancillary products after the vehicle sale, as evidenced by the success of the growing number of companies – of varying reputations – that sell extended service contracts.

Companies currently making news for the class-action lawsuits that have been filed against them have cast a negative light on the industry. Extended auto-service contracts topped the Missouri attorney general’s list of scams for 2009. The AG’s office said customers complained of misleading ads, high-pressure sales tactics and significant, undisclosed limitations on coverage, reported the St. Louis Post-Dispatch.

Reputable companies need an opportunity to reach customers who are interested in purchasing a VSC, but are wary of being scammed. The service drive offers another point of contact with customers who might be receptive to purchasing a maintenance product.

However, service advisors are often ill-prepared to make an effective presentation to customers. In response to this concern, The StoneEagle Group has developed the SEcureSales Tool (SST). This web-based solution provides service advisors with a simple and automated method to sell vehicle service contracts.

SST can be populated with data directly from the DMS to eliminate all duplicate data entry for the service advisor. SST includes a six-step process to ensure all customers get the same presentation without placing undue burden on the service department.

The Van Tuyl Group, Inc. has been using SST in its dealerships for more than 8 months and has seen positive results, says Kent Anderson, field operations manager.

“Functionality is key for an advisor to be able to assess the eligibility of customers and then create and deliver a contract in a short time frame,” Anderson says. “The SST system has taken away a lot of the headaches we used to deal with. It has eliminated hard-to-read handwritten agreements and the need to manually route all documents.”

Anderson adds that the web-based program also allows the service and F&I departments to work more closely. When service advisors are busy, F&I managers can meet with eligible customers and provide a professional, experienced product presentation.

Once the contract is finalized within SST, all contract data are delivered nightly to the corresponding premium finance company and VSC administrator. Additionally, SST includes a reporting module that allows the administrator and dealer to immediately pinpoint performance and production metrics by dealer, dealer group and user.