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November 08, 2010

LITTLE ROCK -- Attorney General Dustin McDaniel announced today that his office has reached a settlement with the former owners of U.S. Fidelis, a Missouri-based company that used unsolicited, prerecorded calls to sell automobile service contracts and extended warranties.

McDaniel joined a group of 11 state attorneys general in the settlement with brothers Darain and Cory Atkinson, former owners of U.S. Fidelis. The settlement ensures that the brothers will never again sell over the phone, and severely restricts how they advertise any other product or service. The brothers must turn over nearly all of their assets to the bankruptcy court in Missouri where U.S. Fidelis filed for bankruptcy protection last spring. Those funds will be used by the bankruptcy estate to compensate the many creditors of U.S. Fidelis.

The Atkinsons owe Arkansas $6.586 million in civil penalties, as well as $100,000 in attorneys' fees and costs. The states continue to negotiate with the bankruptcy estate on behalf of creditors and consumers.

U.S. Fidelis operated as National Auto Warranty Services and Dealer Services. About 6,500 Arkansans paid the company for service contracts sold through deceptive practices and illegal prerecorded calls, known as "robocalls."

McDaniel has filed similar suits against six other companies. All of those companies have since abandoned robcalling in Arkansas. Six of the seven lawsuits have now been resolved.

"Consumers all over the state were frustrated and upset by these intrusive calls," McDaniel said. "I am pleased that this company will no longer use these practices to profit from Arkansans. This company in particular didn't just annoy people at home over dinner. There were attorneys in my office that received robocalls from U.S. Fidelis on their office phones."

McDaniel and the 10 other state attorneys general sued the now-defunct company and the Atkinsons in March 2010. The states accused the defendants of a variety of illegal actions stemming from deceptive junk mail, robocalls, and misleading TV ads. They alleged the company's solicitations mislead consumers to believe their auto warranties had expired or would soon expire and confused customers into thinking that they were being contacted by a manufacturer. Many consumers were led to believe they were purchasing a warranty providing "bumper to bumper" coverage of all major repairs,when, in fact, coverage was often limited.

The Attorney General filed the settlement today in the United States District Court for the Eastern District of Arkansas. It awaits review by that Court.

The states of Idaho, Iowa, Kansas, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Washington and Wisconsin also participated in the settlement.