Thank you to Legal Aid of North Carolina with a special thank you to their intern, Samuel Deese, for reviewing and updating this content.
Back to the Disaster Assistance Manual
8.1 – Overview
Disasters are breeding grounds for unscrupulous consumer practices. Disaster victims, particularly senior citizens, the disabled and limited English or non-English speaking persons, are vulnerable to scams. The schemes developed to scam victims vary and are ever changing. It is difficult to identify all the possible scams that may arise in disaster areas, but a list of common scams is included in this Manual Section. Consumer information is essential to help prevent victimization. Moreover, disaster victims who may not fall prey to scams will need to understand their consumer rights in myriad situations. Even financially sound families may fall behind on credit payments resulting in collection actions.
IMPORTANT NOTE: The information contained in this section is designed to help volunteer attorneys provide preliminary guidance to hurricane victims of consumer fraud or those with debtor/creditor problems in North Carolina.
In most instances, the matters should also be referred to the North Carolina Attorney General (1-877-566-7226 Consumer Protection Hotline). The North Carolina Attorney General’s and Federal Trade Commission’s websites are excellent resources on consumer protection issues: https://www.ncdoj.gov/Consumer.aspx and https://www.consumer.ftc.gov/.
8.2 – Summary of Relevant Laws
Most Common Issues
North Carolina Unfair and Deceptive Trade Practices Act
Home Solicitation Contracts (door to door sales)
Debtor/Creditor
Fair Credit Reporting Act
Price Gouging
Home Equity Fraud
Useful Websites
Common Questions from Homeowners and Answers
Other Consumer Topics:
– “Buyer’s Remorse”
– Identity Theft
– Credit Repair Scams
– How to Get a Free Credit Report
– How to Dispute Errors on Your Credit Report
– Dealing with Debt Collectors
– Bankruptcy
– What is a Judgment for Money?
– Property You can Claim as Exempt from Creditors
– What is a Warranty?
– Dispute about Motor Vehicle Repairs
– Motor Vehicle Repossessions
– Hurricane Florence Loan Servicing Disaster Relief Options
– Offer to Buy House for Cash
– Buying a manufactured home
– Counterfeit Checks
8.2.1 – North Carolina Unfair and Deceptive Trade Practices Act
The NC Unfair and Deceptive Trade Practices Act (UDTPA), N.C. Gen. Stat. § 75-1.1 et seq. protects consumers from “unfair or deceptive acts or practices in or affecting commerce.”
“Commerce” includes all business activities but does not include professional services rendered by a member of a learned profession, such as an attorney. Unfair trade practices include false, misleading, unconscionable or deceptive trade practices occurring between a business and a consumer, such as but not limited to car sales and rental property. Note that a mere breach of contract claim is not an unfair trade practice unless the breach is accompanied by aggravating circumstances. A breach of warranty is considered an aggravating circumstance to establish an unfair trade practice.
A consumer who is damaged by such unlawful practices has a private right of action and may recover damages arising from an actual injury from the unfair or deceptive practice. Those damages may be trebled and attorney fees may be awarded.
UDTPA does not apply to:
– Transactions between private individuals, such as a neighbor selling a car to another individual
– Employer-employee relationships
– Debt collection – see N.C. Gen. Stat. § 75-50 et seq.
8.2.2 – Laws on Home Solicitation Contracts and “Buyer’s Remorse”
NC Door-to-Door Sales Law. It is important to know when a sale constitutes a home solicitation because special laws cover this kind of sale. In North Carolina, NC Gen. Stat. § 25A-38 – § 25A-42 regulates the home solicitation industry and applies to certain consumer transactions in which (1) a seller or someone acting on the seller’s behalf engages in a personal solicitation of a sale to the buyer at the buyer’s residence and, (2) the buyer agrees or offers to make a purchase at the residence. NC law requires specific language to be included in contracts and notices of cancellation. A buyer has the right to cancel a home solicitation contract until midnight of the third business day after the day on which the buyer signs the agreement. If a seller fails to give a buyer notice of the right to cancel the contract, the buyer may cancel the contract at any time.
Cancelling a door to door sale requires the seller to refund any payments made by the buyer and to return the signed contract, note or other agreement. NC door-to-door sales law does not apply to certain transactions, including:
– Sales for less than $25
– Sales made entirely over the telephone or through the mail
– Sales or rentals of real estate
– Sales of insurance or securities
– Sales made after negotiations at the seller’s normal place of business or at a permanent retail shop
– Pre-existing credit card
– Clothing, cars and farm equipment
– Goods and services used for funerals
For further information regarding door-to-door sales, please visit the NC attorney general’s website at https://ncdoj.gov/protecting-consumers/purchases-and-contracts/right-to-cancel/
FTC Cooling-Off Rule. In addition to NC state law, the Federal Trade Commission enforces federal requirements related to home solicitation sales pursuant to the (Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations, 16 CFR Part 429) (Cooling-Off Rule). The Cooling-Off Rule applies to sales at the buyer’s home, workplace or dormitory, or at facilities rented by the seller on a temporary or short-term basis, such as hotel or motel rooms, convention centers, fairgrounds and restaurants. The Cooling-Off Rule applies even when a salesperson is invited to make a presentation in the home. Under the Cooling-Off Rule, the salesperson must tell the consumer about cancellation rights at the time of sale. The salesperson also must give the consumer two copies of a cancellation form (one to keep and one to send) and a copy of the contract or receipt. The contract or receipt should be dated, show the name and address of the seller, and explain the right to cancel. The contract or receipt must be in the same language that’s used in the sales presentation. The Cooling-Off Rule does not cover sales that are:
– Under $25
– For goods or services not primarily intended for personal, family, or household purposes (the Rule applies to courses of instruction or training)
– Made entirely by mail or telephone
– The result of prior negotiations at the seller’s permanent business location where the goods are sold regularly
– Needed to meet an emergency
– Made as part of a request for the seller to do repairs or maintenance on personal property (purchases made beyond the maintenance or repair request are covered)
Also exempt from the Cooling-Off Rule are sales that involve:
– Real estate, insurance, or securities
– Automobiles, vans, trucks, or other motor vehicles sold at temporary locations, provided the seller has at least one permanent place of business
– Arts or crafts sold at fairs or locations such as shopping malls, civic centers, and schools.
For further information regarding the Cooling-Off Rule, please visit the FTC’s website on the topic at: https://www.consumer.ftc.gov/articles/0176-buyers-remorse-when-ftcs-cooling-rule-may-help.
8.2.3 – Debtor/Creditor
Often disasters can trigger financial crises as victims fall behind in their bills. Missed payments or collection actions can damage their credit ratings. Victims should notify creditors of their situations as soon as possible. Some creditors will agree to reduce, reschedule, or even postpone payments for certain periods of time.
Credit reporting is governed by the federal Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq., which requires that credit reporting agencies furnish a free copy of a consumer’s credit report upon request within 30 days after the consumer is notified of an adverse action. Credit reporting agencies also have a statutory obligation to investigate consumers’ claims.
8.2.4 – Unfair Debt Collection
North Carolina law prohibits creditors attempting to collect a debt from engaging in unfair debt collection practices against a consumer. See NC. Gen. Stat. § 75-50. These laws apply to a debtor/consumer who has incurred a debt or alleged debt for personal, family, household or agricultural purposes. A “debt” means any obligation owed or due or alleged to be owed or due from a consumer and a “debt collector” means any person engaging, directly or indirectly, in debt collection from a consumer except third party debt collectors who are not collecting a debt owed to them and are subject to NC Gen. Stat. § 58-70.1 et seq.
NC law prohibits creditors from collecting a debt owed to them by:
– Threatening violence
– Using profanity or abusive language
– Calling debtor before 8 a.m. or after 9 p.m. unless you agree
– Calling debtor more than once a day
– Threatening to have debtor jailed or arrested
– Threatening to garnish wages
– Telling family, friends and employers about debts
The above list is a sample of unfair debt collection practices that may give rise to damages of up to $4,000 per violation, damages and attorney fees. In addition, on behalf of the state, the NC Attorney General may seek damages and injunctive relief when the creditor is preying on NC consumers.
Note that creditors can contact a debtor:
– In person, by mail, by telephone and by fax about the bills you owe
– At home, between the hours of 8 a.m. and 9 p.m.
– At work. It is legal for the creditor to contact you on the job unless they have a telephone number to reach you during non-working hours. Creditors must stop calling you at work if they know that your employer disapproves of their calls.
– Through people who know you. If they can’t find you, creditors may attempt to contact other people who know you, such as neighbors, relatives, friends and employers. Creditors are not allowed to say why they are trying to contact you or how much you owe.
To stop a creditor from calling you at home or work:
– Put your request in writing. Send a letter by certified mail telling the creditor to stop calling your home and your place of work. Keep a copy of the letter for your records.
– Once the creditor gets your letter, they may not contact you again except to tell you that a creditor intends to take action on your account.
– Remember that sending a letter won’t erase your debts. Creditors can still take legal action to collect money that you owe them.
8.2.5 – Prohibited Acts by Collection Agencies
North Carolina has a separate statute, NC Gen. Stat. § 58-70-90 et seq, that covers debt collection agencies who are third parties collecting another’s debt. This statute does not apply to such entities as creditors seeking to collect their own debts, banks, mortgage banking companies and savings and loans associations. Before attempting to collect another’s debt, collection agencies must be licensed by the NC Department of Insurance. NC Gen. Stat. § 58-70-1. Failure to obtain the required license may subject the violator to criminal prosecution.
Generally, the same prohibitions that apply to creditors seeking to collect their own debts apply to collection agencies. See above list for some of the practices that collection agencies cannot use when attempting to collect a third party’s debt and those that they can use to collect a debt.
Collection agencies that engage in prohibited practices may be liable to a consumer for actual damages as well as a penalty up to $4,000 per violation and attorney fees. Treble damages are not allowed.
“Debt buyers” are a type of collection agency subject to additional statutory requirements. NC Gen. Stat. §§ 58-70-145, 58-70-150, 58-70-155. A debt buyer is a person or company engaged in the business of buying “delinquent or charged-off consumer loans or consumer credit accounts, or other delinquent consumer debt for collection purposes.” NC Gen. Stat. § 58-70-15(b)(4).
For further information regarding debt collection and credit repair, please visit the NC Attorney General’s website on the topic at: https://ncdoj.gov/protecting-consumers/credit-and-debt/debt-collectors/ and https://ncdoj.gov/protecting-consumers/credit-and-debt/credit-repair-scams/.
8.2.6 – Fair Credit Billing Act
Under the federal Fair Credit Billing Act (FCBA), 15 U.S.C. § 1666, et seq., if a consumer paid for a purchase with a credit card, and a billing dispute arises about the purchase (e.g., the merchandise shipped was not what was ordered), the consumer can notify the credit card company that he or she wants to dispute the purchase. A sample dispute letter can be found at the following link, under the section titled “Exercise Your Rights”: http://www.consumer.ftc.gov/articles/0219-disputing-credit-card-charges. The dispute letter must be addressed to the credit card company at the address provided for “billing inquiries,” which is typically specified on the billing statement. In addition, the letter must be received by the credit card company no later than 60 days after the first bill containing the disputed amount is mailed. The credit card company must acknowledge the dispute in writing within 30 days after receiving the dispute letter, unless the problem has been resolved. The credit card company must resolve the dispute within two billing cycles (but not more than 90 days) after receiving written notice from the consumer. The consumer may withhold payment of the amount in dispute until the dispute is resolved, but the consumer is still required to pay any part of the bill that is not in dispute.
Note: Disputes about the quality of goods and services are not “billing errors,” so the dispute procedure does not apply. However, if a consumer buys unsatisfactory goods or services with a credit card (or the 60-day period for sending notice of a billing error has expired), a consumer may have other rights under the Act.
For further information about the FCBA, please visit the FTC’s website on the topic at: https://www.consumer.ftc.gov/articles/0219-disputing-credit-card-charges.
8.2.7 – Price Gouging
Price gouging, or charging too much in times of crisis, is against North Carolina law
when a disaster, an emergency or an abnormal market disruption for critical goods and services is declared by the Governor or a city or town.
The price gouging law is currently in effect for the state of North Carolina after a State of Emergency related to Hurricane Florence was declared on September 7, 2018.
Under the law, the NC Attorney General’s Office can put a stop to price gouging and seek refunds for consumers who paid too much. The courts may also impose civil penalties against price gougers of up to $5,000 for each violation. For further information about price gouging, please visit the NC Attorney General’s website at:
https://ncdoj.gov/file-a-complaint/price-gouging/.
8.2.8 – Home Equity Fraud
Most likely, a client’s home is the client’s most valuable possession. By paying down the mortgage, clients build up the equity in their homes. Home equity is the market value of a home minus the mortgage and any other liens on the home. For example, if a home’s market value is $100,000 and the mortgage and all liens are $80,000, the equity is $20,000 ($100,000 – $80,000 = $20,000).
Home equity fraud is the taking of a homeowner’s equity by fraudulent means. Victims of home equity fraud are most often elderly persons, particularly widows over age 70, minorities with limited English skills, or homeowners on small fixed incomes.
Watch out for the following abusive lending practices related to home equity:
Asset-Based Lending. A lender makes a loan based on the equity in the client’s home without an assessment as to whether the client has the ability to repay. If the client falls behind on the payments, then the lender may foreclose on the home.
Loan Flipping. Repeatedly refinancing a mortgage at the direction of a lender for a high-cost, long-term loan. Each refinancing brings with it additional costs and eats into the home’s equity.
Packing. The loan contains charges for services the client didn’t ask for or need.
Hidden Balloon Payments. A lender may offer to refinance a mortgage and drastically reduce the payments. Scrutinize the loan terms, as the monthly payments may not pay off the balance by the end of the loan term. If not, the remaining balance is due in a lump sum at the end of the loan. If the client cannot pay the balance, the lender may foreclose.
Home Improvement Loan. A contractor offers to perform work on the client’s home and arrange financing, but after the client agrees to the project and sign off, client discovers that s/he signed and is now locked into a high-cost, high-interest home equity loan. Always make sure the client understands who is making the loan and that the client has recourse against the contractor if he/she doesn’t finish the job or completes it poorly.
Mortgage Servicing Abuses. Make sure that the lender doesn’t add charges that were not incurred or that the client didn’t understand. Make sure that all payments have been appropriately applied. Clients are entitled to a written explanation of any fees added to their mortgage accounts. Clients can also request a complete and itemized payment history from their lenders every (6) months at no charge.
Signing Over the Deed. Beware of foreclosure rescue scams. The scammer may offer to help the client out of foreclosure by bringing the mortgage current for the client. The scammer will tell client to continue to reside in the property, but they want the client to deed the property over to them until client has paid them back. However, once a client signs a deed over to the scammer, the client is no longer the owner and can be removed from the property. It also does not relieve the client of financial responsibility on the mortgage. Additionally, the scammer can use the equity in the property to take out additional loans.
A foreclosure rescue transaction includes the following features: (1) transfer of residential real property or mobile home permanently affixed to the real property; (2) the real property is the transferor’s principal residence; (3) the transferee or others acting with or on behalf of the transferee makes representations that the transfer will enable the transferor to prevent, postpone, or reverse the effect of foreclosure and to remain in the residence; and (4) transferor retains a tenancy interest, an interest under a lease with an option to purchase, or an option to reacquire the property. Foreclosure rescue transactions are unlawful unless prior to or at the time of transfer, the transferee pays the transferor at least 50% of the fair market value of the property as determined by a certified appraiser. The appraisal must be performed no more than 120 days prior to the transaction and must be given to the transferor at least 7 days prior to the time the transferor would become obligated under the agreement.
A foreclosure rescue transaction must be in writing, signed and acknowledged by all parties, and contain all of the terms that the parties agreed to. At a minimum, the writing must contain: (1) names/addresses of all parties to the contract; (2) legal description of property being transferred; (3) any financial obligation of the transferor being assumed by the transferee in connection with the transaction; (4) total amount to be paid by the transferee in connection with the transaction; (5) the fair market value of the property as determined by a certified appraiser; (6) a description of the interest in the property being retained by the transferor; and (7) the terms of the transferor’s right to any future possessory or ownership interest in the property.
Any violation of the statutes governing foreclosure rescue transactions is an unfair/deceptive trade practice. A homeowner that is harmed can bring an action for damages, to void a transaction in violation of the law, as well as for declaratory or equitable relief.
How Can I Protect Myself From Home Equity Fraud?
DO NOT:
– Agree to a home equity loan if you cannot afford the monthly payments
– Sign any documents you do not understand or that have blank spaces to be filled in later
– Let anyone pressure you into signing a document
– Agree to a loan that includes products or services that you do not want
DO:
– Keep careful records of payments or ask for a payment history from the lender
– Get contractors’ references and multiple estimates for any work that needs to be done on the home
– If a client does not understand terms of a loan, speak with an attorney
– Consider all costs of financing before agreeing to a loan
– If a client is refinancing the mortgage or obtaining a home improvement loan, client homeowner has a legal right to cancel the transaction within three (3) business days at no cost
8.2.9 – Reverse Mortgages
A reverse mortgage is a loan available to individuals who are 62 years of age or older, which converts equity in the home into cash (monthly payments or a line of credit). This can be a valuable retirement planning tool, but there are certain pitfalls. The home must remain the person’s primary residence and property taxes/homeowners insurance must be maintained—if not, this can trigger a default and a possible foreclosure filing. If the loan is not paid back by any heirs/devisees of the property upon death of the borrower, then the property can be foreclosed upon and the equity can be lost. Additionally, any fees/interest that accrue over time can decrease the value of equity in the property to any heirs/devisees.
8.2.10 – Useful Websites
Price Gouging: https://ncdoj.gov/file-a-complaint/price-gouging/
Consumer Protection – Home Solicitation: https://ncdoj.gov/protecting-consumers/purchases-and-contracts/right-to-cancel/ and https://www.consumer.ftc.gov/articles/0176-buyers-remorse-when-ftcs-cooling-rule-may-help
Fair Credit Billing: https://www.consumer.ftc.gov/articles/0219-disputing-credit-card-charges
Disaster Scams: https://ncdoj.gov/disasters.aspx
Mortgage Foreclosure “Rescue”: https://www.consumer.ftc.gov/articles/0100-mortgage-relief-scams
Debt Collection: https://ncdoj.gov/protecting-consumers/credit-and-debt/debt-collectors/
8.2.11 – Key Contacts
To report a complaint about any of the topics listed above, consumers should contact the North Carolina Attorney General at 1-877-5-NO-SCAM, or file a price gouging complaint online, go to https://ncdoj.gov/file-a-complaint/ .
North Carolina Attorney General: Consumer Protection Division
Website: https://www.ncdoj.gov/protecting-consumers/
Consumer Protection Hotline: 1-877-566-7226
General number: 1-919-716-6000
8.3 – Common Scams
Adapted from Nebraska Disaster Relief Manual
8.3.1 – Appliances
After a disaster, it is important to think about replacing appliances that may have been damaged for safety reasons. Damaged appliances can cause fires, explosions, or electrical shock. If your appliance technician says that you need to replace an expensive or major appliance you should ask for their opinion, what materials would be used, and replacement cost in writing and discuss this with your insurance adjuster before committing to anything. It wouldn’t hurt getting a second opinion. Do not pay for anything upfront or if the work is not completed.
8.3.2 – Automobiles
If your car was “submerged in water to the point that rising water has reached over the floorboard, entered the passenger compartment and caused damage to any electrical, computerized or mechanical components” call your insurance company and have it checked out by a car dealer or repair shop. Sometimes car dealers try to sell cars that have been damaged after a flood. If you’re buying a used vehicle, inspect it carefully. Look at hidden parts or crevices to check for mud or silt, which indicates water damage.
Under North Carolina law, flood damage to a car must be disclosed in writing before the car is sold. Vehicles that have been partially or totally submerged in water resulting in damage to the body, engine or transmission are classified as flood vehicles.
Failure to disclose flood damage to a vehicle in North Carolina or removing the title or supporting documents with the intent to conceal damage, repaired or otherwise, is a class 2 misdemeanor with penalties of up to $5,000 per violation. Anyone who reconstructs a total loss claim vehicle and does not affix a “TOTAL LOSS CLAIM VEHICLE” tamperproof permanent marker to the doorjamb, or who removes, tampers with, alters, or conceals it, can be charged with a Class I felony with fines of at least $5,000 per violation.
Before you buy a used car, get the Vehicle Identification Number (VIN) to do a title search for the current owner’s name and address, purchase date, purchase price, sales tax, if owner is a car dealer, and odometer reading. The National Insurance Crime Bureau (NICB) has a database for salvaged vehicles you can check if you have the VIN. Visit https://www.nicb.org/vincheck.
8.3.3 – Charity Scams
Some “charities” are scams. Instead of using their donations for what they say they will be used for, scam artist keep the money for themselves. Here are some warning signs to be on the lookout for:
– Requests for donations due to people needing help urgently;
– A charity name you have never heard of before;
– The charity is not listed at www.give.org;
– The charity does not have an active number to call to see if it is real;
– A charity that cannot send you a brochure, donor form, or that does not have a website;
– Door-to-door solicitors that accept donations made out to them personally;
– If the only way you can donate is by giving cash to the solicitor; or
– If you are asked over the phone to provide your confidential information (i.e. credit card number or bank account number).
8.3.4 – Home Repair Scams
Home repair scams are common after disasters. Check with the Better Business Bureau before choosing a contractor or get recommendations from friends, relatives, neighbors, coworkers, insurance agents, or claims adjusters. See a Consumer’s Guide to Protecting Yourself after a Disaster – https://nclbgc.org/protecting-yourself-after-a-disaster/.
See whether the company is local. Does it have a track record with references in the area? Ask the contractor if you can see their see previous work. Ask for the names and phone numbers of their previous clients and if they would be willing to talk with you. If they give you the client list, ask the previous client if they are satisfied with the work, if the contractor did what he or she promised to do and if they would hire the contractor again. Also check the company vehicle to see if it displays the company name, address, and phone number. Find out if the contractor has worker’s compensation and liability insurance. Get at least two bids in writing to compare the costs but know that a lower costs doesn’t always mean a better deal and higher costs doesn’t mean better quality.
Look at the contractor’s business license and keep the number. Check to see if the contractor is licensed in North Carolina. A “General Contractor” license is required in North Carolina when the project exceeds $30,000.
Before signing any contract make sure the contract is a detailed written contact that specifies:
– All the materials that will be used in terms of quality, quantity, color, size and/or brand name.
– A payment schedule should also be established. On home remodeling projects, you should expect to make a down payment representing approximately one-third of the total contract price. Excluding the down payment, you should not make payment for any incomplete work. All of these terms should be spelled out in the contract and clearly understood by both you and the remodeler/builder.
– The contract with your builder or remodeler should state that the work is to be performed in accordance with all applicable building codes and zoning regulations. If you are remodeling, check with the Building & Safety Department to find out what permits are needed to proceed with your project.
– Do not sign a partial or blank contract! Read each clause carefully and ask any questions you may have before signing. Then, retain a copy of the contract as soon as you sign and file it in your records.
– Any warranty (including terms, conditions and oral promises) offered by the contractor should be in writing in language you can understand. You should read it carefully.
– Make sure the written contract includes: the contractor’s full name, address, telephone number and proof of Workers Comp and liability insurance.
– Be skeptical if anyone comes to you to regarding work that they believe needs to be done on your home.
– Be on the lookout for typical warning signs of a possible scam:
The “contractor” uses high-pressure sales tactics like “special deals.”
A small repair quickly turns out to be a big repair.
High-pressure to make immediate decisions.
Demand for money before any services are done or before the work is completed.
You should call the NC Attorney General’s Consumer Division at 1-877-566-7226 if you suspect a scam is occurring or if you are a victim of a scam.
8.3.5 – Storm Chasers
Unfortunately, disasters attract scam artists who take advantage of those who need help rebuilding or repairing. Storm chasers are out-of-town contractors that travel to places hit by disasters to “provide home repair services.” These contractors may not be licensed or may do poor quality work. The Better Business Bureau suggests that storm victims:
– Get the company’s complete name, address and phone number. Be skeptical of any vague or hesitant answers, or no offers of contracts, brochures, or anything in writing.
– Beware of high-pressure sales tactics. A reputable company will be happy to let you check them out first.
– Make sure your contractor has all the appropriate permits for the work they are doing and verify that the company has liability and worker’s comp insurance. If a contractor cannot provide proof, beware. If possible, verify that the insurance is active by contacting the contractor’s insurance company directly.
– If it is an out-of-town or out-of-state company, ask how any warranty issues or problems will be addressed after the work is done and the company is gone.
– Ask for references from previous jobs and check them out before signing the contract.
– Before work starts, have a signed, written contract including start and completion dates, exact costs, specific work to be done, and warranty information. Read any fine print carefully and understand all terms before signing.
– Get at least 3-4 quotes from contractors and insist that payments be made to the company, not an individual.
– If you have damage, check with your homeowners’ insurance to have an adjuster sent to determine if and how much they will cover to repair or replace damaged property.
– Be highly suspicious of a contractor that asks you to pay for the entire job upfront. He may take your money and never return.
8.3.6 – Debris Removal
Debris removal scams are common after disasters. If anyone approaches you about removing debris be skeptical. Here are some tips provided by the Federal Trade Commission:
– Check with local officials to find out whether tree and debris removal contractors need to be licensed in your area. If so, confirm that the license for the contractor you’re considering is current. Never sign any document or pay any contractor before verifying their license.
– Call NC Consumer Protection Office at 1-877-566-7226
– Ask a contractor to provide their license and certificate of insurance once they are on your property. If a contractor tells you certain work is covered by your insurance, call your provider to confirm.
– Get a written estimate and sign a written contract that includes a description of the work to be performed, what materials are included, when the work will be finished, the price, and the address and phone number of the contractor.
– Read all agreements carefully before you sign. Make sure all blanks in a bid or contract are filled in. Speak with your neighbors about what they are paying for similar work.
– Pay with a credit card or check, and be wary of contractors who ask for a deposit in cash or to be paid in cash. Negotiate a reasonable down payment with full payment to be made only upon satisfactory completion of work.
– Trust your gut. If you have any doubts about hiring someone or entering into a contract, take your business elsewhere.
8.4 – Frequently Asked Questions
Q 8.1 – What can I do to protect myself from unscrupulous contractors?
Consumers who live in areas that have been hit by storms and other disasters need to be wary of scammers who may try to take advantage of them.
The North Carolina Attorney General’s Office provides the following tips to avoid trouble with home repair after a disaster:
Do not pay for work up front. Inspect the work and make sure you are satisfied before you pay. A reasonable down payment may be required for some projects, but don’t pay anything without getting a written contract. Avoid paying with cash; use a check or a credit card instead.
Beware of any contractor who tries to rush you or who comes to your home offering assistance. If an offer is only good “now or never,” find someone else to do the work. Avoid contractors, including roofers, who go door-to-door offering services. Instead, get recommendations from friends, neighbors, co-workers and others who have had work performed on their homes recently.
Get three written estimates for the work, if possible, and compare bids. Check credentials and contact the Attorney General’s Office and the Better Business Bureau to learn about any complaints against the contractor. Ask to get the contractor’s certificate of insurance directly from their insurance company, not from the contractor. Before work begins make sure you get a written contract that lists all the work to be performed, its costs and a completion date. Read the contract and make sure it includes any verbal promises you may have received from the contractor. Services like cleaning or storage of your belongings often come with extra charges, which can really add up depending on the length of storage.
Don’t pay large fees in advance. If a small contractor claims to need a lot of money in advance for supplies and materials, it may be a sign that he has poor credit or is in bad financial shape. If you wish to do business with such a contractor, buy the supplies and materials yourself and pay for the labor once the project is finished.
If a consumer has a complaint about disaster repair or need to check out a contractor, contact the North Carolina Attorney General’s Office for help or call toll free within North Carolina at 1-877-566-7226.
Urge consumers to contact the Attorney General if someone calls with what the consumer feels is a scam – an early alert can prevent others from fraud. Urge them to contact consumer reporters of local media outlets to notify them of scams.
For further information about disaster repair and selecting a contractor, please visit the North Carolina Attorney General’s website on the topics at: https://ncdoj.gov/protecting-consumers/natural-disasters/disaster-repair/ and https://ncdoj.gov/protecting-consumers/home-repair-and-products/home-improvement/.
Q 8.2 – What is a contractor’s or mechanic’s lien?
After a disaster, a homeowner frequently needs major repairs for serious damage. These repairs may include roofing and siding, plumbing, electrical wiring, heating and cooling, replacement of damaged structures, interior living quarters, etc. The cost of these repairs is most likely greater than the insurance coverage and the ability of the homeowner to cover the cost. Frequently, a low-income homeowner has deferred maintenance which may make the damage ineligible for FEMA funding.
The homeowner may feel trapped between the high cost of the repairs and the limited funding for repairs. Unscrupulous contractors or salespeople will take advantage of the fears of the homeowner and agree to make the repairs at unrealistic prices or via financing schemes.
If the contractor provides inadequate or incomplete repairs or services and the homeowner refuses to pay, the contractor may place a “contractor’s or mechanic’s lien” on the home. A “lien” is a legal claim or security on the property for any amount of money or services owed to another. Anyone who furnishes materials or labor to improve or make repairs to real property can file a lien on that property without the homeowner’s permission. This includes design professionals who provide services related to improvement of real property, contractors, and subcontractors.
The claim of lien on real property must be filed within 120 days from the date when labor or materials were last furnished to the project. The claim of lien must satisfy the statutory requirements in NCGS 44A-12 and be served on the owner. If the owner still refuses to pay, a lawsuit to enforce a claim of lien on real property must be filed within 180 days from the date when labor or materials were last furnished to the project. If a lien on real property is properly filed, perfected and a judgment is entered in favor of the contractor or subcontractor (lien claimant) the court can order that the property be sold to satisfy or pay the lien and order the homeowner to pay attorneys’ fees to the contractor.
Homeowners should be very careful when selecting contractors or other trades people to make repairs to their homes.
Q 8.3 – Should I consider refinancing my home to pay for home repairs or other expenses?
Because of the increased costs of confronting an emergency, consumers frequently fall behind in their credit payments or overextend themselves to the point that they must choose whether to pay creditors or obtain basic necessities such as food. Such consumers are often approached by finance companies promising to consolidate the homeowner’s debt for existing mortgage, credit card debt, car loans, and repair loans. These companies then pressure the homeowner to sign multiple agreements without providing the homeowner sufficient time to review them or consult with anyone.
The negative outcomes of such refinancing schemes include high processing fees, payments to bogus/phantom creditors, and default on the loan. The homeowner often cannot pay both the refinancing costs and basic living expenses, resulting in a situation far worse than before the refinancing.
Lower income and minority borrowers, as well as elderly homeowners, are often targeted by predatory lenders. They encourage borrowers to lie about their income in order to get a loan; knowingly lend the borrower more money than he or she can repay; charge unnecessary fees; pressure borrowers into high-risk loans and use high pressure tactics to sell home improvements; and then finance them at higher interest rates. These predators pounce on desperate situations. A few tips for consumers include:
– Beware of lenders who claim that they are the only hope for a loan or ask borrowers to sign a contract/loan agreement with missing information.
– Beware when lenders say refinancing your home can solve credit or money problems.
– Always interview several contractors and lenders. Check with friends or family for recommendations.
– Research lenders, contractors, appraisers, etc. with the Attorney General’s Office or the Better Business Bureau and review their complaint history.
– Never make false statements on a loan application. Any lender who allows this is fraudulent and possibly criminal.
– Do not let anyone convince you to borrow more money that you know you cannot afford.
– Attend homeownership education courses. They are available through the U.S. Department of Housing and Urban Development (HUD) or counseling agencies.
Q 8.4 – Can I trust my family member or close friend to help me with expenses?
Isolated homeowners who need assistance to maintain their homes frequently are victimized by friends, relatives, or caretakers. They assist the homeowner with household chores, including shopping or taking them on medical visits. Children of elderly parents sometimes seek control of their parents’ property for their own uses. Often, these persons use scare tactics to convince the elderly, disabled, or limited English or non-English speaking homeowner to transfer title of the property to them. Sometimes they obtain a power of attorney when a person is very sick. Unbeknownst to the homeowner, the power of attorney holder may convey or encumber the property and keep the proceeds.
If a power of attorney is needed, consider a Limited Power of Attorney, whereby the agent has no authority to make any contracts regarding the home.
Q 8.5 – What do I need to know about foreclosure consultants?
The North Carolina Attorney General provides the following tips on avoiding foreclosure relief and loan modification scams and how to get real help instead:
– Beware of so-called foreclosure assistance or rescue companies that require payment up front before they “help” you. It’s illegal to charge an upfront fee for foreclosure assistance or loan modification services in North Carolina.
– Steer clear of foreclosure assistance or rescue companies that want you to make your mortgage payment to them, or who tell you not to talk to your mortgage company or to an attorney.
– Watch out for so-called real estate investors, who promise to pay off your mortgage if you sign over the deed to your property, but not the mortgage. The investor then rents your home back to you or to a tenant but doesn’t make mortgage payments and the bank forecloses. Remember, just signing over your deed doesn’t get you out of the responsibility for paying your mortgage.
– Other scam tip offs: the schemer refuses to put his or her promises in writing, pressures you to sign paperwork you haven’t had a chance to read thoroughly, or offers to fill out the paperwork for you.
– If you get behind on your mortgage payments, you should contact with your lender immediately. Remember, most banks and mortgage lenders do not want to foreclose because they lose money on foreclosure sales. Even if you are delinquent, many lenders will be willing to offer a temporary forbearance or a loan modification to avoid foreclosure.
– Free help dealing with foreclosure is available from a pair of programs administered by the NC Housing Finance Agency. The Foreclosure Prevention Fund assists homeowners who lose their jobs or experience certain temporary financial hardships. The Foreclosure Prevention Project can help homeowners who are facing foreclosure for any reason. This program can connect homeowners with free housing counseling, help them work with their mortgage servicer, and provide access to legal services for homeowners with lower incomes. Both programs can be reached at 1-888-623-8631.
Q 8.6 – How do I decide which bills to pay first?
Before deciding which bills to pay and which to ignore, consumers need to know the consequences. The types of debts listed below could have immediate, harmful consequences if unpaid:
Court-ordered payments, such as alimony or child support, must be paid on time or jail time could be sought for contempt of court. If clients are unable to pay, do not simply ignore it. Ask the court to modify the payment order. A court will usually lower or eliminate your payments to meet your new financial condition. (Additionally, if a client is on social security disability, his or her children should be eligible for “dependents’ benefits,” which may cover the client’s support obligations in their entirety. Check with the client’s local Social Security office.)
Ongoing services, such as utilities, telephone service, or health insurance coverage, must be paid or consumers will lose future service or coverage.
Items purchased on credit or pledged as security on a loan can usually be taken if payments cannot be made. However, a lender is unlikely to seek the return of any property unless a borrower misses several payments and is uncooperative. If the consumer needs extra time to make payments, he or she should contact the lender in advance.
Generally speaking, a consumer should pay his or her bills in the order of priority: home mortgage/rent, medical bills/food/utilities/court ordered payments, and then everything else. Your credit card bill is the last bill that you pay, and you only pay it if you have paid for your necessities in full.
But be aware: even after a creditor has taken one of the above steps, it may still have the right to recover money. For example, although a bank has repossessed a car, if its resale value is less than what is owed, there may be liability for the difference.