A long overdue bill sitting on the desk of Missouri Governor Jay Nixon would bring the sale of auto service contracts, commonly referred to as extended warranties, under the licensing and oversight jurisdiction of the state’s insurance regulators.
The bill was introduced by a lawmaker whose district includes Wentzville, Missouri, the home of U.S. Fidelis. That company's bankruptcy last March brought to light abuses in the sale of these contracts.
U.S. Fidelis was featured in a Today Show report that said that over 1100 complaints were filed against the company. Eventually the Attorney General of Maryland sued the company, alleging that the auto service contract issuer had violated Maryland’s Telephone Solicitation Act.
If signed into law, the bill would mean Missouri’s Department of Insurance, Financial Institutions and Professional Registration would have the power to withdraw a company’s license if it thought the warranty seller was putting consumers at risk. Under the new plan some financial institutions, car makers, and dealerships which are already regulated could begin selling these contracts without additional licensing requirements.
One practice used by these contract providers was to tie warranty coverage to the use of vehicle additives - a practice that regulators in Missouri eventually found to be illegal. The state’s Attorney General formed a task force to look into the abuse and at least one task force member wishes that the legislation had went further.
The President of the St. Louis Better Business Bureau indicated to stl today that three recommendations of the committee were not included in the law. Those excluded provisions included a requirement for telemarketers to disclose cancellation and refund procedures, and also for them to define what repairs are covered.
Some of the main provisions of the law are:
- That contracts be sent to consumers within 45 days of a phone purchase
- To give canceling consumers full refunds within 20 days after the contracts have been mailed to them, and to give prorated refunds to customers who cancel after the free look period
- Eliminate deceptive practices commonly employed in the sale of these contracts, including telling prospects that their new-car warranties are expiring, claiming an affiliation to the car makers or the dealership and claiming their product “extends” the new car warranty
The Missouri Attorney General’s chief counsel in this matter said that people within the industry had voiced the opinion that something needed to be done to “tame” an environment that he described as the “wild, wild west.”