Fred’s Appliance forced to pay nearly half a million in back taxes, fines

February 25, 2019 7:32 PM

Kelsie Morgan,

Posted: February 25, 2019 7:32 PM

Updated: May 20, 2021 9:21 AM

by Kelsie Morgan

OLYMPIA, Wash. — Washington’s Insurance Commissioner has reached a nearly half million dollar agreement with Spokane-based Fred’s Appliance, Inc. over illegally selling service contracts for more than a decade.

The Office of the Insurance Commissioner said in a release Monday, “Companies that sell service contracts in Washington state must register with the insurance commissioner.”

According to the commissioner, Fred’s Appliance was not registered to do so, but sold 39,520 service contracts to consumers in Washington, resulting in the company collecting $13.2 million in premiums.

Fred’s Appliance tells KXLY4 the whole situation boils down to a misunderstanding.

Ryan Holzapple, as assistant general manager for Fred’s Appliance, said what they were selling were actually were ‘protection plans,’ a supplemental fee which guaranteed the customer a five-year warranty on any appliances purchased. Holzapple said they were unaware the protection plans were considered service contracts by the state insurance commissioner.

Holzapple said the company had used and sold protection plans for 20 years and only had one complaint, which resulted in the action from the office of the insurance commissioner.

According to Holzapple, the company became aware they did not have the correct registration in mid-January of 2019 when a cease and desist order was issued. He says the company immediately took all necessary steps to become compliant and pay back taxes and fees.

On February 21, 2019, the company and the Insurance Commissioner reached an agreement which required Fred’s Appliance to pay $448,627 in back taxes, penalties, and interest as well as a $10,000 fine.

In addition to the payment, Fred’s Appliance agreed to become a registered service contract provider no later than Aug. 21, 2019, and to develop a service contract product that complies with state law. If the company fails to do so, the Insurance Commissioner will impose an additional $15,000 fine.

Holzapple says the agreement will not affect Fred’s customers at all. The company will still be honoring previous protection plans.

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