Settlement reached with vehicle extended service contract seller

Attorney General Chris Koster said Sept. 25 that his office has reached a settlement with Carsafe, LLC that will restructure the way Carsafe sells vehicle service contracts and provide $10,000 in restitution.  Carsafe, which previously did business as Dealer Preferred Warranties, will also pay $12,500 to the state. Carsafe is an Oklahoma-based company, which has an office in St. Charles.

The consent judgment against Carsafe prohibits deceptive sales techniques in the sale of vehicle repair coverage.  The judgment also requires Carsafe to describe during sales phone calls the details of the written contract.  These important terms and conditions include information about:

• The identity of the service contract provider;

• The exclusions, conditions and coverage liability limits under the contract;

• Any deductibles under the contract;

• Requirements for prior approval of vehicle repair;

• Obligations of the consumer to perform and document past or future maintenance;

• The consumer’s right to a free look and the procedure for canceling; and

• The consumer’s right to a pro rata refund of unearned fee for any cancellation before the full term of the contract.

The consent judgment also provides that if Carsafe completes the contract with the consumer in a telephone transaction, it is required to electronically record all transactions and must mail the written contract to the consumer within three business days.

Further, the consent judgment bars the illegal sale of vehicle repair coverage using the “additive scam,” in which companies delivered a bottle of ordinary oil additive in a scheme to avoid the consumer protections required under insurance and service contract laws.

The case has been a joint prosecution by the Attorney General and the Department of Insurance.

“Missouri law says consumers have a right to see a written service contract and agree to its terms,” Koster said. “Customers who purchase vehicle repair coverage by telephone often later realize the significant limits to coverage in the written contract.  It is important for Missouri consumers to protect themselves by carefully reviewing vehicle service contracts to make sure they contain the provisions promised.”

“Most sellers of these extended service contracts must have a license from the Missouri Department of Insurance,” said Insurance Director John M. Huff. “We encourage consumers to contact our department to make sure the seller is licensed and authorized to do business inMissouri.”

Koster and Huff encourage consumers to verify that a business is licensed by calling the Department of Insurance at 800-726-7390 or visiting insurance.mo.gov.  The judgment requires Carsafe to obtain a license with the department to offer contracts in Missouri.

Consumers who suspect fraud or have complaints about businesses selling motor vehicle extended service contracts should contact the Department of Insurance.  Consumers may also report service contract fraud to the Attorney General’s Office at ago.mo.gov or by calling the Attorney General’s Consumer Protection hotline at 1-800-392-8222.