Missouri Attorney General Chris Koster recently announced a settlement with a business alleged to have improperly marketed limited-time extended warranty programs for vehicles.  The AG stated that the settlement “highlights [his office’s] efforts to clean up the auto service contract industry in Missouri and protect consumers from future deceptive sales practices.”

According to the AG, the seller marketed warranty services throughout the United States primarily through direct mail advertisements, urging consumers to call for a limited-time extended warranty program to save thousands of dollars on repair bills.  The AG alleged that salespeople attempted to sell vehicle breakdown coverage with a generalized and often misleading description of the coverage, and that many customers later discovered their contracts were actually provided by a third party and did not contain the coverage promised.   The AG also alleged consumers who requested refunds faced numerous objections and delays.

The AG alleged that the seller attempted to market these service contracts as “additive contracts” to avoid Missouri’s insurance and service contract laws.  The seller would mail the consumer a contract along with a bottle of ordinary oil additive.  The AG alleged that in reality, the contract had little to do with the oil additive.

The January 2014 settlement requires the owners to pay $60,000 to resolve claims of deception, unfair practices, and unlawful insurance practices, and also permanently prohibits them from selling “additive contracts” in Missouri.

This action by the Missouri Attorney General may be part of a larger trend of state AGs placing greater scrutiny on certain types of service contracts.  For example, the Attorney General of Minnesota recently issued an alert to consumers warning them to avoid certain “extended warranty” contracts for motor vehicles.  Given this apparent trend, businesses that sell service warranties should carefully review state requirements placed on the sale of service contracts to ensure they comply with each state’s laws.