April 25, 2011
Jefferson City, Mo. -– Attorney General Chris Koster said today his office has reached a settlement with a St. Charles-based company, Dealers Warranty, LLC, d/b/a Mogi, and its owner, Brian Marino. The consent judgment, entered today by Judge Lucy Rauch of St. Charles County, settles a lawsuit brought by the Attorney General and Director John Huff of the Department of Insurance, Financial Institutions and Professional Registration.
According to Koster, Marino operated a call center that is no longer in business. Dealers Warranty marketed vehicle breakdown coverage with direct mail post cards and by telephone. The post cards were designed to lure consumers to call a toll-free number by deceptively implying that “Dealers Warranty” had information that the consumers’ warranty was “about to expire.” This company also used robo-dialing to contact consumers throughout the United States. Once on the phone, salespeople would sell vehicle breakdown coverage with a generalized and often deceptive description of the coverage. Because of its deceptive use of the name Dealers Warranty, in early 2009 the company did begin operating under the name “Mogi” before ultimately closing its doors.
Missouri law requires that motor vehicle extended service contracts with consumers be written and that the issuers or providers of such contracts be registered with the Department of Insurance. Missouri law also requires that motor vehicle service contracts made with consumers must clearly and conspicuously describe the consumer’s right to cancellation, along with other rights. Yet, Dealers Warranty and Brian Marino ignored these requirements. Instead, if a consumer asked questions during the sales call about cancellation, the sales managers at Dealers Warranty were instructed to check a box in the computer enrollment system that would delay the delivery of a written contract document until the window for refund had passed.
Finally, Dealers Warranty also sold breakdown coverage under the pretense of the “additive scam.” The consent judgment entered today establishes a restitution fund intended to provide a full refund to any Missouri consumer sold this illusory coverage. The auto additive coverage contracts were structured by sellers as so-called “product warranties” with the intent to avoid regulation. Consumers were often surprised by the additives they received in the mail. The sale of breakdown coverage in this manner is the unlawful sale of insurance without proper licensing and oversight. Marino has been enjoined from any future sales of this type of coverage.
“I want to emphasize to consumers their right to see a written service contract and agree to its terms. Under Missouri law, the failure to contract in writing is a violation of Missouri’s Motor Vehicle Extended Service Contract law,” Koster said.
Customers who purchased coverage under “service contracts” by telephone often later realized the significant limits to coverage. Customers asking for a cancellation or refund when they discovered the provider would not pay a claim were often denied a refund or made to go to great lengths to obtain a partial refund.
“This company used a ‘bait and switch’ scheme and preyed on consumers’ fears of not having adequate vehicle breakdown coverage. I believe these telephone sales centers have been rife with fraud, and Missouri continues to be at the center of this deception. This office will continue to pursue and prosecute businesses that target unsuspecting, innocent consumers.”
Koster said the Missouri Senate recently approved legislation that would bring some reasonable oversight to this industry. “I want to personally thank Senator Scott Rupp for his leadership in working to bring common-sense regulation to an industry in great need of additional oversight. I also thank Senator Mike Kehoe for his support, as well as House Minority Leader Mike Talboy and Speaker Steve Tilley, sponsors of the companion House bill. I applaud their leadership and am hopeful that the House will soon pass and Governor Nixon will sign SB 132 into law.”
Koster said under the settlement agreement, Marino must pay the state $125,000 in restitution and civil penalties and is prohibited from any further violation of Missouri’s Merchandising Practices Act, No-Call laws, Motor Vehicle Extended Service Contract law and Insurance laws.
Koster encourages consumers who have complaints about businesses selling motor vehicle extended service contracts to contact the Attorney General’s Office at ago.mo.gov or by phone calling the Attorney General’s Consumer Protection hotline at 1-800-392-8222.