Missouri Clamps Down On Auto Extended Service Contracts

Missouri is the home of now-defunct US Fidelis, which marketed auto service contracts – often called “expended warranties” - nationwide. Now, the state has a new law that places new requirements on these companies.

Missouri Attorney General Chris Koster said the law goes a long way in cleaning up an industry that was rife with problems.

Troubled industry

“This is a troubled industry that has too many illegitimate players that have given the industry a bad name,” Koster said.

Consumers often purchase extended warranties on used cars, believing that almost anything that goes wrong with the vehicle will be covered. However, it hardly ever turns out that way. Some companies also look for ways to avoid having to pay claims.

New requirements

The requirements contained in the new Missouri law include requiring sellers of motor vehicle extended service contracts to:

• Provide a copy of the proposed contract to a consumer before a sale, if the consumer requests to see it;
• Allow a “free-look” period that allows a purchaser to cancel the contract within at least 20 business days after purchasing;
• Provide full refunds, minus any claims paid, for cancellation.  The seller may charge a reasonable administrative fee in a cancellation, not to exceed $50;
• Become licensed; and
• Not use the word “warranty,” when, in fact, such contracts are not considered “warranties” under law; represent falsely they are affiliated with a manufacturer or dealer; or represent they have knowledge that a consumer’s warranty is expiring.

Koster's office has maintained 12 lawsuits against auto service contract telemarketers in the last year for the type of business practices addressed in the law.  In addition, Koster’s office obtained criminal indictments in June against Darain Atkinson and his brother Cory Atkinson, who owned and operated U.S. Fidelis.  The indictments include felony charges of unlawful merchandising practices, stealing, and insurance fraud. 

Koster said it is fitting that Governor Jay Nixon signed the law; as then-Attorney General, Governor Nixon filed the first lawsuits against auto service contract sellers using deceptive practices.