Attorney General Chris Koster says his office is trying to find a way to ‘play nicely’ with companies that offer auto service contracts; trying to stop fraud without taking those companies to court.
Koster has now held two meetings of the “Auto Service Contract Task Force,” which aims to meet with some of the businesses verging on fraud.
“We have filed over 10 lawsuits in the space already, Automobile warranty contracts is an area where we get more consumer complaints than almost any other across the state, and frankly it’s the same across the nation. So it’s been a very problematic industry. We are trying to provide guidance so we don’t have to sue every company out there. We can actually provide them with a pathway toward honest business,” Koster said.
Koster says up until recently, most of these businesses have operated outside the department of insurance and the regulatory control of the government.
“Government regulation over the industry has been too loose, and that has lead to a lot of fraudulent activity by these automobile warranty companies. We are trying to increase the regulation to try and drive out more and more of the fraud in order to protect Missouri consumers,” Koster said.
He says the key to avoiding these scams is reading the fine print.
“Be very aware that the contractual language in many of these contracts is very slippery and you should not engage one of these companies and you should not engage one of these companies until you have read that contract and read it very cautiously,” Koster said.
Koster says there hasn’t been a lot of fraud reported from major companies or carmakers; it mostly comes from those smaller businesses offering these types of car warranties.
“The cost of the contract is sometimes greater than the cost of the insurance. Imagine paying $4,000 for a premium for an insurance policy that will never pay out more than $3,000. No one would do that, but when you review the fine print of some of these contracts people are getting caught in some very, very bad situations such as that,” Koster said.