You've seen all the positive news about emerging trendy companies like ZipCar and RelayRides and maybe a few others that are hoping to outsmart Hertz and Avis and make car rental as easy as getting a hamburger at McDonald's.

They want to use the internet and social media in high population density areas to make cars readily available right in your own neighborhood whenever you need one... and you might even be willing to enter your own car into the vehicle pool if it means extra income... what could possibly go wrong?

Nothing... Until you read the fine print. In New York the state's Department of Financial Services has read the fine print and they've told RelayRides to cease and desist because they've misrepresented the insurance risks to potential customers.

On RelayRides.com you're told you could earn up to $1,000 a month! "We pre-screen all drivers and provide $1 million insurance on every rental. You control your price and decide who rents your car and when." Sounds like an intriguing proposition, right?

According to onlineautoinsurance.com, The 'cease and desist' order was issued last week by Benjamin M. Lawsky, superintendent of financial services for the New York Department of Financial Services (NYDFS), along with a consumer alert that warned motorists throughout the state that the car-sharing service, which facilitates peer-to-peer car rentals for a fee, provided “illegal and inadequate” car coverage from Hudson Insurance Company.

“RelayRides sold New Yorkers a false bill of goods,” Lawsky said in the release. “Despite RelayRides’ assurances to the contrary, their New York customers could get left holding the bag financially for an accident because the company’s insurance is illegal and inadequate.”

Lawsky described the NYDFS investigation for “typical” rentals. According to the NYDFS, RelayRides said the liability policy offered by New York insurer Hudson would cover the car owner renting out the vehicle in lieu of that owner’s own policy, which would “not be involved if there is an accident while a person is renting a vehicle.” RelayRides also offered to “directly reimburse vehicle owners for physical damage to the vehicle at RelayRides’ discretion.” The rentals entailed a Hudson-issued, $1 million liability policy for injury or third-party damage.

However, according to the NYDFS, state insurance law mandates that a car owner’s personal liability policy cover “any person who drives the vehicle with the owner’s permission.”

“New York law does not permit an insurer to exclude coverage for a renter,” Lawsky said. “As a result, an owner may be personally liable for any accident that occurs while the vehicle is being rented.”

RelayRides CEO Andre Haddad said in a statement that the company is “actively working” to rectify issues with the NYDFS but would be “suspending activities that it considers non-compliant” in the meantime.

“Innovation, by its nature, does not always fit within existing structures,” Haddad said. “Although we’ve been careful to ensure the protections offered to our member community comply with legal frameworks around the country, we learned in conversations with the NY Department of Financial Services that it believes there is noncompliance with certain unique aspects of NY insurance law.”

The San Francisco-based company said that, effective immediately, vehicles in New York would no longer be available to renters, though “trips already in progress” would not be impacted.

Haddad said that the company is shooting, by 2015, to make a RelayRides car rental available within a 10-minute walk of 100 million Americans.

RelayRides offers car rentals in 17 cities across the U.S., which includes six in California, and is “committed to the democratization” of the car-sharing services it provides, according to Haddad.

The NYDFS said that the ongoing investigation should include more information from Hudson, which is the target of investigators seeking to uncover “the full extent of violations related to RelayRides New York business and any penalties DFS may impose.

If you're thinking about renting a vehicle from similar services check with your state Attorney General's office first. They should be able to give you guidance from their Consumer Affairs Dept. that will let you know whether it's legal, and secondly, whether you should consult your own auto insurance provider too.

Caveat emptor!