Mo. AG announces $60,000 settlement

Bryan Cohen Apr. 30, 2012, 9:31am


JEFFERSON CITY, Mo. (Legal Newsline) - Missouri Attorney General Chris Koster announced a settlement on Thursday with a vehicle extended service contract seller resolving allegations of deceptive sales techniques.

Under the terms of the agreement, Carhill Enterprises Inc. will pay $40,000 in restitution and a $20,000 penalty to the state. The judgment will restructure the way the business sells vehicle repair coverage by requiring the company to describe the details of written contracts during sales phone calls.

The terms and conditions that must be included in the phone conversations include the consumer's right to pro rata refund if the contract is canceled before the full term of the contract, the consumer's right to a free look and the procedure for canceling, obligations of the consumer to perform and document past or future maintenance, requirements for prior approval of vehicle repair, any deductibles under the contract, the exclusions, conditions and coverage liability limits under the contract, and the identity of the service contract provider.

If Carhill completes the contract during a telephone transaction, the company is required to record the transaction electronically and mail the written contract to the consumer within three business days. The judgment stops the illegal sale of vehicle repair coverage using an additive scam in which companies delivered a bottle of ordinary oil additive to avoid the consumer protections required under service and insurance contract laws.

Carhill will continue in business under the injunction. The case was jointly prosecuted by Koster 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."

Carhill Enterprises has applied for a Department of Insurance-issued license.

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