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The state of Missouri could soon impose some of America’s harshest restrictions on companies that sell extended auto-service contracts. This contract is a form of vehicle-breakdown coverage that became controversial after a number of firms in the St. Louis area were charged of defrauding consumers.
A measure designed to eliminate fraud in the industry needs only the approval of Governor Jay Nixon, whose office staff says he will review the bill within a couple of days. The Missouri Legislature approved the bill last week.
Among the new regulations contained in the bill is a requirement that sellers of service-contract should have the proper license from state insurance regulators.
The bill was sponsored and introduced by state Sen. Scott Rupp, a Republican from Wentzville, after recent scandals that involved service- contract companies.
For over a decade, the area around St. Louis has been a center for several dozens of telemarketing companies selling the coverage. Chris Koster, the Attorney General of the state of Missouri, in 2009 has called the area, “the Silicon Valley for auto-service contract scams.”
Many of these companies operate call centers in Rupp’s St. Charles County district. The biggest among them, US Fidelis, filed in March 2010 for bankruptcy.
Under the proposed measure of Sen. Rupp, the state of Missouri’s Department of Insurance, Financial Institutions and Professional Registration could revoke the license of a seller if there is sufficient belief that consumers are at risk. However, a number of financial institutions, automakers and car dealers who were already being regulated by the state would still be able to sell service contracts without necessarily getting a license.