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Hi Tom,
Not much to add here – you seem to know all the options you have with these companies. I am fortunate that I only see one a month or so of these “fly by night” companies. I usually only deal with two service contract companies and these are the best I have ever dealt with (door rate payments/pay diag time/prompt payment) so I know that I am lucky.
What I do for anyone that comes in with a contract from a company we don’t normally due business with is tell them their car does not leave until I am paid in full. They either pay me and then I will reimburse them once I get the check, or wait for the company to pay. Creates some difficult discussions, but at least I have not been stiffed for payment since I started doing this a few years ago.