Hurricane Sandy might be little more than weather system that’s disintegrated, but the damage she wreaked is still being felt in the most devastating ways. As bad as her damage was, what’s worse is the further misery some people are continuing to shell out to the storm’s victims. The Consumer Financial Protection Bureau released tips for consumers to keep in mind as they began picking of the pieces of their lives. With so many predators who are just looking for ways to separate these victims with what they have left, it’s important to stay on guard. It’s most certainly not fair, but it’s necessary.
Here are a few of those tips.
First, it’s important to keep in mind the context of this storm’s timing. With tough economic times still a part of many family’s lives, financial considerations were already overwhelming. Add to that the expensive clean up and repairs, and it’s more than overwhelming: it can be devastating. So many were not prepared for this storm as more Americans had less put back for emergencies. It’s a common theme around the nation. And it’s what crooks and deceptive lenders are banking on.
CFPB stresses the importance of the growing number of home improvement loan scams. It, along with the FTC, defines this time of fraud as one of the most rampant scams in the northeast. Usually, what happens is a contractor makes contact, usually by calling, or in instances where phone service is down, they make contact by approaching your home. They offer to repair your roof or remodel rooms in your home that were damaged. The price sounds reasonable, but the consumer says he can’t afford the repairs. It’s then that the contractor tells you financing the remodel or new roof is easily accomplished through a lender he works with. The consumer agrees to the project, and work begins. Soon, you’re asked to sign paperwork.
Often, the lender rushes the homeowner through the review process so that there’s not a lot of time spent reviewing the terms and conditions. It’s not until later the consumer realizes he’s signed a a home equity loan, complete with high fees, interest rates and points. Sometimes, if the homeowner attempts to slow down the paperwork process, the contractor will pull back and threaten to leave the job until the paperwork has been signed. Not surprisingly, the contractor always manages to threaten this at a crucial point: when the home is exposed because he’s already pulled the rest of the roof off or if pipes are exposed, further risking water damage to the home. Before long, the homeowner sees that the work is shoddy. But the contractor has already been paid and he’s off to rip off the next homeowner.
There are ways homeowners can prevent this type of scam. It’s all about taking a proactive approach, including avoiding contractors who demand cash payments or a total due in his hands before he begins work. If a contractor can’t show his ID, prove his physical address, show where he’s licensed, or whether or not he even has a tax ID number, these should all be red flags to consumers. Further, homeowners should not produce personal financial information, either. You are obligated to share some information with any financial entity, but never to a contractor. Also, steer clear of those contractors who “know someone” who can get the lending lined up. Odds are, they’re in cahoots and their target is the vulnerable homeowner.
As far as the paperwork goes, never allow anyone to rush you through that process. You should be given ample time to carefully review the terms and conditions. If you’re not being accommodated, move on.
If a stranger appears at your front door with promises to fix the damage, be sure to never give him your insurance information, your social security number or even your banking information. He needs none of that. Never enter into a contract with a contractor who appears out of nowhere. If he can extend the time needed to check his credentials, then he has none and you’re likely being scammed. If your questions aren’t being answered, move on. If he can’t provide you a phone number, move on.
Complete your own due diligence before entering into a financial contract with any lender. Before you decide your contractor has the best lender, compare that lender’s rates and terms. Also, be very careful you’re not taking out a home equity loan or even a second mortgage. You’d be surprised at how those types of deals are packaged by those looking to take advantage of your situation.
Finally, if you feel as though you’re being scammed, both CFPB and the FTC recommends contacting the Department of Housing and Urban Development. This agency has information that can help you be smart about home improvement loans. It can also put you in touch with legitimate federal and community-based programs, as well as provide general consumer advice. Plus, your state’s attorney general may also be a good resource to get the right information as well as the ideal place to file a complaint. The time you take to file a complaint about a shade contractor could save another family from becoming a victim.