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Attorney General's News Release

January 18, 2011

Attorney General Koster announces recommendations to address problems with ‘bad actors’ in the auto service contract industry -- calls for consumers to have information on what they’re buying; for sellers to be licensed --

Jefferson City, Mo. – Attorney General Chris Koster today released recommendations to overhaul the auto service contract telemarketing industry, including requiring sellers of such contracts to be licensed and enacting stronger protections for consumers to know what repairs a policy covers.

“The problems with this industry are well-documented, particularly the abuses against consumers,” Koster said. “The recommendations we are offering give consumers the right to know what they are buying and the ability to say no thank you when they’ve been lied to.”

Koster created the task force last April. The recommendations come out of meetings held by the group, which included other statewide officials as well as representatives of entities that offer extended auto warranties. Koster created the task force to address frequent problems such unfair cancellation provisions and the fraudulent marketing of engine additives.

The Attorney General’s office has maintained 12 lawsuits against auto service contract telemarketers in the past year. The new recommendations are designed to stop the behavior that led to the need for lawsuits.

According to Koster, if fully implemented, the recommendations would completely redesign the segment of the auto service contract industry that solicits consumers through direct-mail and telephone solicitations. Specifically, the recommendations include:

  • Requiring sellers of motor vehicle extended service contracts to deliver contracts to the consumer within thirty days, or prior to the purchase if requested by the consumer;
  • Requiring licensing of all sellers of motor vehicle extended service contracts not otherwise covered by other licensing. Licensing would come under laws covering sellers of insurance products; and
  • Outlining consumers’ rights, including a 20-business-day “free look” period to give consumers ample time to request a refund. The Task force also recommended explicitly prohibiting fraud and deception in any aspect of the offer, sale and solicitation of contracts.

“Too many bad actors in the auto service contract business have taken advantage of, and actually cheated, consumers,” Koster said. “It is time for this outrageous behavior to end, and for this industry to be held to the same standards as other Missouri businesses.”

Koster thanked and commended task force members for their work, including co-chair Senator Scott Rupp, and John M. Huff, Director of the Missouri Department of Insurance, Financial Institutions and Professional Registration.

The full report is available on the Attorney General’s website at: http://ago.mo.gov/auto_service_task_force_report.pdf.



 
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