The state accused the company, which went out of business in 2009, and its owner, Steven Chapa, of misleading consumers.
The company contacted consumers by direct mail, the Internet and telephone and led them to believe their original warranties were about to expire, state prosecutors said. The pitch was to "extend" the original warranty, but the company actually was selling extended-service contracts, including so-called "automotive additives," state officials said.
Additives are usually some form of coolant to be added to a vehicle's engine oil or the radiator, supposedly to extend the vehicle's life.
The practice is misleading several ways, state prosecutors said. Consumers are told to install the additive to activate the warranty. However, fine print in the contract often says that they can't get a refund if they cancel the policy without returning the unused additive. In some states, additive warranties also exploit a loophole in state insurance regulations by claiming that the additive is a "product" and not a form of insurance.
Direct-to-consumer marketers compete with dealerships for extended-service contract business, according to the Service Contract Industry Council, a trade group based in Tallahassee, Fla.
Missouri has been cracking down on direct marketers of extended-service contracts in general, and automotive additives in particular, ever since the bankruptcy last year of U.S. Fidelis, a company that had a high-profile, nationwide advertising campaign.
The state of Missouri passed stricter regulations for automotive extended-service contracts earlier this year.
A key provision is intended to ensure that customers who order a policy online or over the phone receive a written contract in a timely manner. That way, they have time to review the terms and still get a full refund in case they decide to cancel the policy.