Missouri legislators should eliminate "a frenzy of telemarketing fraud and deception" by requiring companies selling extended auto-service contracts to be licensed by the state, according to a report released Tuesday by Missouri Attorney General Chris Koster.

The report was developed by Koster’s office and a task force he appointed to look into the business practices of service-contract sellers.

In recent years, the dozens of service-contract marketers have operated in St. Louis. Many have been accused of deceptively marketing the aftermarket vehicle coverage, making it difficult for customers to cancel, pocketing refund money owed to consumers and selling contracts riddled with fine-print exceptions and limitations.

Koster proposes having service-contract sellers licensed by the state’s Department of Insurance, Financial Institutions and Professional Registration, Regulators would be able to suspend or revoke the licenses if companies employed fraudulent, coercive or dishonest practices.

The 24-page report encourages lawmakers to pass laws that would:

• Require sellers to send written contracts to consumers within 30 days of an over-the-phone purchase, or before purchase, if requested by a consumer;

• Make the firms issue full refunds to consumers who cancel within 20 business days after the written contract has been mailed to them; and give prorated refunds to consumers who cancel after that free-look grace period.

• Prohibit some common deceptive tactics used by service-contract sellers, including misrepresentations to consumers that their vehicles’ factory warranties have expired or are about to; that the seller is affiliated with an auto maker or dealer; or that the service contract "extends" a car’s factory warranty.

The recommendations "give consumers the right to know what they are buying and the ability to say no thank you when they’ve been lied to," Koster said in a prepared statement. "It is time for this outrageous behavior to end."

The report suggests legislators take no action when it comes to so-called product warranties, an unusual form of coverage sold by several St. Louis area service-contract firms. Technically, the warranties are not tied not to a vehicle but to a product, such as a protective engine or transmission additive.

Koster’s office maintains such warranties are already illegal. But that remains in dispute and the subject of several lawsuits against product warranty sellers by the attorney general, who accuses them of selling insurance without a license.

Koster filed the suits following a 2009 Post-Dispatch investigation exploring the widespread sale of product warranties. The warranties are seen as especially problematic because they do not need to be refundable or underwritten by insurance companies, as with service contracts.