Don't fall for this customer "protection" racket

Chances are pretty good you've listened to a pitch to buy a so-called "protection plan" or "extended warranty" -- those service contracts that companies sell on everything from home appliances to utility pipes, cars to credit cards.

Thousands of U.S. consumers pay for such a plan offered by cable giant Comcast, forking over $4.99 per month in exchange for assurances they will not be charged for in-home repairs covered under the plan. But the fine print conveniently excludes the wiring inside walls, a point its representatives routinely denied in conversations with customers, alleges Washington State Attorney General Bob Ferguson, who is suing Comcast to recover $73 million consumers in his state paid for the "near-worthless" service-protection plan.

"This case is a classic example of a big corporation systematically deceiving Washington State consumers and putting profits above those customers and the law," Ferguson said at a press conference announcing the lawsuit.

He's the first attorney general to take on Comcast over the plans, though others could follow. The state's suit seeks a total of $100 million after tacking on penalties for other anti-consumer practices including improper service-call fees and unauthorized credit checks. Comcast in a statement defended its offerings and has promised to "vigorously defend" itself in court.

Meantime, consumers in other states who are paying for the Comcast plan should rethink the $60 annual expense. As should those paying for similar plans peddled by so many companies, such as home warranties, extended coverage on used cars, plans that cover your credit-card minimum payment if you lose your job, and utility protection plans. The plans typically are larded with exclusions designed to ensure high profit margins for those selling them.

Worried about costly potential repairs to your buried sewer line? Chances are the protection plan excludes damage from tree roots -- one of the most common causes of pipe failure.

When offered such a plan, you may be inclined to ask questions or read the fine print. You'd be wasting your time: It's probably a rip-off, says Tony Giorgianni, associate finance editor for Consumer Reports. He's a longtime nemesis of such plans who has read the fine print on dozens of service contracts, which are carefully designed to minimize paid claims to consumers.

"You can go crazy paying companies for every little thing that can go wrong with a product, that you'll go broke," he said. "We don't like any of these things."

Instead, Giorgianni said, you should buy reliable products, maintain them as recommended, and self-insure by putting what you would have paid for a "protection" plan into a bank account to cover repairs as necessary.

One particularly egregious example, which has inspired lawsuits by other state attorneys general: "extended warranties" on used cars, which often arrive in the mail disguised as offers from car makers or car dealerships, Giorgianni noted, though generally they're dreamed up by third-parties. Few of the car expenses you are most likely to face are actually covered. And many of the companies offering such plans have gone out of business, leaving consumers with a fully worthless plan.

Some service contracts are described as "warranty" products, which Giorgianni blasts as dishonest. By definition, a warranty is provided free by a manufacturer concurrent with the sale of a product.

If you're determined to buy such a plan, he said, make sure to read the contract, ask questions and check out your plan with some online research. Visit Better Business Bureau and state attorney general websites for records of complaints, and look at employee-review site Glassdoor for feedback from employees concerned their company may be ripping off its customers.

Some consumers will come out ahead on such plans -- just as some who fork over $2 for a lottery ticket will wind up millionaires. Most won't.