Natural Disasters: A Breeding Ground for Contractor Frauds
The tally for natural disaster losses in 2011 are in and the results are not pretty. According to USA Today  the U.S. was hit with 12 – 14 separate weather and climate disasters, each of which caused a minimum of $1 billion in damages. The approximate price tag for these natural disasters alone exceeds $50 billion. The resulting tornados, flooding and severe thunderstorms all mean one thing for insurers and consumers; homes will need to be repaired. In addition there will be claims to file and contractors to hire to perform the repair work. For many homeowners the warning is out, deal with only proven contractors and avoid the door-to-door con artists that prey upon stressed out homeowners.
According to the International Association of Special Investigative Units (IASIU)  phony contractors are a big problem after natural disasters. Many swindlers are locally based, however often times they’re unlicensed out-of-state con artists who go door-to-door. These supposed contractors will often perform little to no work or perform work with shoddy materials and in some cases cause more damage to homes in order to inflate their fees. In any event homeowners need to be aware that many homeowners’ insurance policies typically will not cover fraudulent repairs, leaving the owner with repair bills and costly shoddy work that must be redone at their own expense.
As a homeowner you must be vigilant when hiring a contractor for home repairs. Here are some red flags that homeowners should be wary of regarding scam contractors:
- Offers repairs at low costs but demands a significant amount of payment upfront
- Drives unmarked vehicles or vehicles with out of state plates
- Does not provide you with a physical address
- Uses high-pressure sales tactics
- Refuses to show a contractors license
- Urges you to borrow money for repairs, then steers you to a specific lender or wants to act as an intermediary
- Asks you to sign paperwork that you have not had time to review
- Wants personal financial information before starting any repairs
If you are a homeowner and you need repairs done to your home after a natural disaster here are some tips to protect yourself from fraud by nefarious contractors:
- Ask your insurance company for established contractors.
- Have your insurer inspect the damage before repairs commence.
- Always pay by check, so that you have a record of the transaction and you will be able to initiate a stop payment in the event the contractor is a con artist or does shoddy work.
- Deal only with licensed and bonded contractors. You can check the National Association of State Contractors Licensing Agencies website for information regarding the contractor’s license for your particular state.
- Insist on a signed contract before work begins.
- Always read any documents before signing them and if you don’t understand any of the terms, ask for clarification.
- Never, ever give any personal information (e.g., your SSN, any credit card numbers or bank account information).
- Get at a minimum two repair estimates.
- You shouldn’t expect to pay more than 20% upfront, and don’t make a full payment until the terms of the contract are met.
As always if you believe you are a victim of a contractor scam, contact local law enforcement, report the scam to your state Attorney General’s office and file a complaint with the Federal Trade Commission. Furthermore you can also report fraud to the National Disaster Fraud Hotline by calling toll free at (866)720-5721 or at firstname.lastname@example.org.
Thomas R Kaiser Sr. is a Certified Identity Theft Risk Management Specialist in the financial services industry in mortgage banking, identity theft, check fraud and insurance.
 Rice, Doyle (2011). USA slammed by 12 disasters that each cost at least $1B. USA Today. Retrieved from: http://www.usatoday.com/weather/news/story/2011-12-07/billion-dollar-disasters/51704362/1
 Coalition Against Insurance Fraud. Irene’s Stormy Aftermath: Seven Ways To Save Your Home From Crooked Contractors. Retrieved from: http://insurancefraud.org/newsRelease.lasso?recid=3098