ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, August 29, 1996 TAG: 9608290091
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: MEGAN SCHNABEL STAFF WRITER
NOTE: Above
If your Holdren's refrigerator doesn't keep the milk cold anymore and your manufacturer's warranty has expired, be prepared to pay for repairs yourself, because your extended service contract is no good anymore.
But even if you've been left holding a worthless contract, you may be able to recoup some of your money.
Customers who bought extended service contracts from Holdren's Inc. appliance stores in Southwest Virginia found out early this week that the North Carolina company that bought Holdren's last month is not honoring those contracts.
Crenshaw TV & Appliance of Raleigh bought only Holdren's assets - worth $2.3 million - and not its $3.1 million in liabilities, which included the service contracts and other unsecured debts.
"Basically, it's like a Wal-Mart coming in to where a Kmart was," said Steve Vaughn, vice president of both Crenshaw and the new company operating as Holdren's. "We certainly have understanding for them - there's got to be some restitution. But we really can't be responsible for somebody else's liabilities."
That leaves consumers two choices, said Elaine Lidholm, a spokeswoman for the Virginia Department of Agriculture and Consumer Services.
Customers may file claims directly against Holdren's Inc. in General District Court. Depending on the jurisdiction, filing a claim costs about $30 to $50. It's not necessary to hire an attorney for such cases, she said, although some consumers choose to do so.
VDACS Division of Consumer Affairs also is accepting written customer complaints. Holdren's was required to post a $100,000 letter of credit with the consumer office before the company could begin selling service contracts. That money is still held by the state and may be available to pay off customers left holding the worthless extended service contracts.
But the process could take months.
"We're just now starting to get calls," Lidholm said. "Until we know how many complaints there are, you don't really know the scope of what you're working with. You can't start allocating any money until you have some sense that all the complaints are in."
Neither Holdren's nor Crenshaw officials will say just how many service contracts were sold by Holdren's, or how much they're worth. The contracts typically cost $100 and up for three to five years of coverage.
Allan and Carol Schmaeman of Roanoke spent $600 on five-year service contracts for the stove and refrigerator they bought from Holdren's two years ago. They found out Monday that they'll have to pay out of their own pocket to have the fridge fixed.
Allen Schmaeman said he wants to round up as many Holdren's customers as he can and hire a lawyer. "We need to have a group - all the people who have been stung by this," he said.
Judging by the number of people who have been calling both Holdren's and the store's service center, Schmaeman may not have much trouble finding other angry customers.
Robin and Donnie Dillon, former Holdren's employees who bought the company's service center in 1995, say they have been fielding numerous calls from frustrated customers with broken appliances and useless service contracts.
Before Holdren's was purchased by Crenshaw, the Dillons, who operate as The Service Center, fixed appliances for Holdren's customers as well as their own clients. The appliance retailer then paid the Dillons for the work. But now they've been told Holdren's new owner no longer will reimburse them for repairs.
She and her husband feel bad, Robin Dillon said, but they don't have much choice. "I'd love to do work for free all day long," she said. "But I can't."
She said she believes the new owners intended to honor customers' contracts, whether or not they were part of the initial deal. "I just don't think they knew how many were out there," she said.
"Our original intention, when we began talking with Crenshaw, was that they would take the complete service contract liability," said Stan Cross, former president of Holdren's Inc. But the negotiations dragged on for a month, he said, and the North Carolina company decided not to take on the contracts.
Vaughn, the Crenshaw vice president, said he was not present at all the negotiations and could not comment on them. But he said there had been some confusion immediately following the purchase of the company, and the new Crenshaw employees may have mistakenly accepted old Holdren's contracts for a short time.
Additionally, some Holdren's Inc. customers may have been billed for service contracts after the sale of the company was completed. Crenshaw is holding any checks it has received from these customers, Vaughn said, and will return them or may allow the customers to join Crenshaw's service plan at a similar price.
The general manager who had been in charge of the new company - Holdren's of Virginia Inc. - resigned Tuesday, Vaughn said. Operations now will be handled from Raleigh. The new owners also have closed the Vinton Holdren's and are changing the name of the remaining four Holdren's stores to Crenshaw TV & Appliance.
Crenshaw sells extended service contracts, Vaughn said, but offers them through a national contract business, Phillips Priority Co. Contracts sold by Phillips, General Electric and other national companies typically are insured, so even if both the contract issuer and the retailer go out of business, the consumer is protected.
Fran Stephanz, executive director of the Better Business Bureau of Western Virginia, said consumers usually are better off not buying service contracts at all.
"Service contracts are just a really good way for businesses to make extra money," she said.
The contracts typically run concurrently with manufacturers' 12- to 24-month warranties - which are free. And if an appliance is going to break down, she said, it usually will happen within the first year.
Manufacturers are not required by law to offer warranties, Stephanz said. But if a company does provide a warranty on a product, it must make a copy of that warranty available to consumers to read before making a purchase.
Grace Smith of Vinton, whose family has shopped at Holdren's for three generations, said she is both angered and saddened by Holdren's recent problems. She bought a refrigerator a year ago and paid an additional $160 for a five-year service contract.
"As long as Holdren's has been in Roanoke, we've been customers," she said. "I really think it's heartbreaking. I hate to see them go out like this."
WHERE TO CALL FOR HELP
If you bought an extended service contract from Holdren's, you can:
File a suit against Holdren's Inc. in general district court. The Virginia Division of Consumer Affairs offers a free brochure, "How to sue someone in a Virginia general district court," that you can request by calling (800) 552-9963 or (804) 786-2042.
Or you can file a complaint directly with the consumer affairs office. If you notify the state that you bought a Holdren's contract, they may be able to help you recoup some of your losses. Call to request a complaint form or talk to a counselor.
LENGTH: Long : 132 lines ILLUSTRATION: PHOTO: ALAN SPEARMAN/Staff. Allan Schmaeman and his wife spentby CNB$600 on five-year service contracts for the stove and refrigerator
they bought at Holdren's, but they'll have to pay for repairs
themselves. color.