This is a new reason not to buy extended warranties. The companies that back them may not last as long as the contract. One Bay Area couple said they felt like they were being asked to bail out the warranty company that was supposed to be protecting them.
Tom and Lucy McCarthy take off nearly every weekend in their 40-foot motor home.
"It has all the convenience in the world. It's got a washer and dryer, two TV'S," said McCarthy. "And it expands into a large apartment when we're done."
And it's great for taking their grandson and his go karts all across the country to compete.
"We've gone to Atlanta, Georgia, Whistler Canada , Gainesville Ohio," said McCarthy.
To keep the camper in good shape, they bought an extended warranty from Heritage Insurance for nearly $6,000.
But things took a strange twist when they tried to make a claim. Heritage had authorized $680 worth of repairs to the motor home -- way back in May. But it never paid the claim.
Lucy kept calling and finally an agent offered an unbelievable deal.
"And you send us a payment of $4,000 some odd dollars and then we will immediately refund your $680 back. That got me, that was it," said McCarthy.
Amazingly, the agent said Lucy would have to pay $4,000 to get her $680 back.
The proposal says: she would buy a second policy worth $6,300, she'd get a $2,000 discount and pay $4,200. Then she could get back her $680.09 back.
"I don't know I was flabbergasted, just flabbergasted," said McCarthy.
Heritage even offered to put her on a monthly payment plan.
"With all the bailouts that was going on this was one more. Hutchinson did say they were having financial difficulties," said McCarthy.
Consumer Action's Joe Ridout says warranties are risky even in good economic times.
"Now that not all the businesses are going to survive two or three years into the future, you've got to be sure the company's going to be there to deliver the services," said Ridout.
"I didn't know what to do and people were saying call 7 On Your Side," said McCarthy.
7 In Your Side contacted Heritage and it said claims were delayed because of a dispute over which insurance payers were responsible. and it agreed to pay the McCarthy's claim.
"You guys were just so great. Miraculously last week I got the check for $680," said McCarthy.
Heritage Administrative provides the actual contracts for Heritage Insurance gets. The Better Business Bureau gives Heritage Administrative Services of Ohio an unsatisfactory rating after receiving 167 complaints, most about warranty claims. The company did not respond to 122 of them. The company told us disputes are being resolved.