Given the high number of natural disasters that has affected the country in recent months and the financial pressures that often accompany such devastation, the CFPB issued a warning on its website to consumers against contractor and lender financial scams and set out some helpful guidance. Believing that consumers who need to make immediate repairs to their homes are more susceptible to deceptive practices, the Bureau emphasized protection against home improvement loan scams and offered both warning signs to watch out for and tactics to avoid a loan scam. The Bureau listed the following:
- The contractor demands full payment up front or in cash only.
- The contractor has no physical address or refuses to show ID.
- You have to disclose personal financial information (perhaps to “speed up payment”) to start the repair or lending process.
- If you have to borrow to pay for the repairs, the contractor steers you toward a particular lender or tries to act as an intermediary between you and a lender.
- You are asked to sign something without enough time to review it.
Avoiding the scam:
- Carefully question strangers who show up and knock on your door, offering repairs.
- Never give any personal financial information, such as an insurance number or Social Security number.
- Never sign any document without fully reading and understanding it. If you don’t understand something, ask for an explanation.
- Do your own research before borrowing any money to pay for repairs.
- Get a loan quote from someone who is not recommended by your contractor and compare their amounts, repayment schedules and rates. If they differ significantly, ask both parties why.
The Bureau also referred consumers to other agencies, such as HUD, the FTC, and state AGs and other authorities for assistance.