Missouri Settles With Another Auto Warranty Company

The State of Missouri has reached a settlement with Missouri-based Dealers Warranty, LLC, settling a lawsuit brought by state officials.

If you ever received one of those post cards in the mail, warning you that your auto warranty was expired, chances are it came from Dealers Warranty. According to Missouri Attorney General Chris Koster, the company also 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.” 

The complaint said the 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.

Claims denied

Francisco of Overland Park, Kan., purchased coverage for $2,403 but discovered his truck's problems were never covered.

“So Ford puts the truck on a machine that does its test on the heater and air conditioner system and finds the truck needs a new heater case and blower motor,” Francisco told ConsumerAffairs.com. They in turn calls Dealer Warranty and the claim was denied.”

Koster said Dealers Warranty violated a number of state laws, including one that requires 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.

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.

Bait & switch

“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.”

US Fidelis, another Missouri-based company marketing extended service contracts to vehicle owners, was sued by a number of states before finally declaring bankruptcy last year.