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Protecting Used Car Service Contract Buyers

Missouri law that protects used car service contract buyers many of whom have poor credit has been on the books for over a year and a half in the State of Missouri
Protecting Used Car Service Contract Buyers
Our experience

It is a fact that used car buyers with problem credit as well as traditional borrowers with good credit that have, at least in the past, been contacted by call centers fradulently representing themselves as used car warranty companies.

Here Auto Credit Express we’re familiar with this story because for more than twenty years we’ve been helping car buyers searching for online car loans, many with terrible credit, find those car dealers that can offer them their best chances for car loan approvals.

Today, however, we’ll be discussing something that can still occur – although not nearly as often as in the past: buying a used car service contract (sometimes incorrectly called an “extended warranty” from some sellers).

Used car service contracts

Even with the quality of used cars today, we usually suggest that buyers, especially those with bad credit, consider buy an auto service contract that covers the entire loan term.

The reason we do this is simple enough: it’s important for consumers living on a tight budget to avoid large, unforeseen vehicle expenses. For those with credit issues it’s especially crucial since an inoperative vehicle is a big reason many high-risk car loans end in repossession.

We also encourage credit-challenged buyers to buy a service contract from the selling dealer for a number of reasons – not the least of which is that by doing so they’ll be covered by the consumer protection laws of their state. Here’s why:

Used car service contract scams

As soon as they close the deal either a new or used car there’s a good chance buyers, regardless of their credit, will be swamped with letters, phone calls and even emails from companies that want to sell them either a service contract or an “extended warranty” (although even this is really a service contract).

While many of these offers are from legitimate companies, some are not and those who aren’t will do almost anything to get customers to sign up.

In the past, a disproportionate number of these call centers were located in and around the St. Louis, Missouri area (a 2011 study by the Better Business Bureau noted nearly a quarter of service contract complaints related to business in this area). This prompted the State of Missouri Attorney General’s office to conduct a two year investigation that resulted in a new law.

Missouri law

Describing the state of Missouri as “becoming a hotbed for deceptive direct mail and telemarketing campaigns”, the Service Contract Industry Council (manufacturers, insurers, retailers, providers and administrators representing 80 percent of the industry) worked closely with the Missouri Attorney General’s office to draw up legislation that was signed into law in July of 2011.

Designed to prevent companies from using deceptive or unethical marketing practices to sell motor vehicle service contracts, also known as extended auto warranties, it took effect January 1, 2012.

According to SCIC executive director Timothy J. Meenan, “At the urging of the SCIC, specific language in the bill prohibits individuals or companies from engaging in false, deceptive, or misleading conduct with respect to a motor vehicle extended service contract program, and authorizes restitution to any victims.”

The law more clearly specifies consumers’ right to a refund if they cancel a motor vehicle service contract.  The SCIC model language requires consumers to receive a copy of the terms and conditions of one of these contracts before the sale. It also created a new licensing framework for Missouri-based businesses and individuals that sell motor vehicle service contracts.

The Bottom Line

Car buyers should never purchase a vehicle service contract until they’ve first researched the company. Buying one from the selling dealer is an even better idea because licensed motor vehicle dealers must adhere to their state’s consumer protection laws while outside companies don’t necessarily have to.

One more thing: regardless of where it’s purchased, buyers should first shop around to be sure the policy they’re buying is competitively priced.

Finally, one last tip: Auto Credit Express where we match people that have experienced difficulties with their auto credit with new car dealers that can offer them their best chances for approved car loans.

So if you’re ready to reestablish your car credit, you can begin now by filling out our online car loan application.

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