Question 1: What type of scams should I be aware of?

The Attorney General’s office warns consumers to be aware of various types of fraud affecting victims of natural disasters. These are home repair fraud, fraudulent disaster recovery organizations, charitable solicitations and other schemes.

Question 2: How do I protect myself against home repair fraud?

Home repair scam artists are known to swoop in after storms, floods or other natural disasters to take advantage of people who are scrambling to make repairs. The homeowner should take extra caution before contracting to have damaged or destroyed property repaired or rebuilt. The homeowner should not succumb to pressure tactics. The Attorney General’s Consumer Protection Division offers the following tips to help protect individuals and companies from being duped by dishonest contractors:

1. Be wary of door-to-door solicitors because many home repair con artists are transients who move quickly into a troubled area. Ask for recommendations from people you know and trust. Whenever possible, use established local contractors.
2. Call the Attorney General’s Consumer Fraud Hotline: 800-386-5438 (Chicago); 800-243-0618 (Springfield); or 800-243-0607 (Carbondale) to check out a business and to find out how many consumer complaints, if any, have been filed against a particular business.
3. Be cautious when a home repair company only lists a telephone number or post office box number as its contact information.
4. Always ask for references. It is a warning sign when a company fails to provide references when requested.
5. Do not pay cash or make a check payable to a person other than the owner or the company name.
6. Shop around for the best deal. Get written estimates from several contractors and don’t allow a salesperson to rush you into a deal.
7. Get all terms of a contract in writing; obtain a copy of the signed contract and never make full payment until all work has been completed to your satisfaction. Note that the Illinois Home Repair and Remodeling Act (815 ILCS 513) requires contractors to furnish customers with written contracts for any repair or remodeling work costing more than $1,000. A contract must be signed by both the customer and the contractor.
8. Be aware that you have the right to cancel within three business days if you sign a contract based on a salesman who comes to your home.
9. The Illinois Home Repair and Remodeling Act requires contractors to carry at least minimum amounts of insurance for property damage, bodily injury, and improper home repair.
10. Contractors also must provide consumers with an informational pamphlet    titled “Home Repair: Know Your Consumer Rights.”
11. Ask to see any required state or local permits or licenses. Remember that insurance adjusters must be licensed by the Illinois Department of Financial and Professional Regulation, Division of Insurance. Consumers who have insurance problems can contact the Illinois Department of Financial and Professional Regulation, Division of Insurance.
12. Roofers must be licensed by the Division of Professional Regulation. To determine if a roofer is licensed, consumers can contact the Division of Professional Regulation.

Question 3: How do I protect myself against fraudulent disaster recovery organizations?

Disaster victims need to be on the lookout for con artists seeking personal or financial information:

1. After disasters the Attorney General’s office has received reports of consumers receiving telephone calls from people impersonating government disaster relief organizations seeking their bank account information.
2. Note that the Federal Emergency Management Agency (FEMA) does not contact disaster victims; the victim must first contact FEMA.
3. If you receive a phone call like this, do not give out any personal or financial information that could endanger your identity or bank account. Bank account information could be used to remove money from consumer’s bank accounts.

Any consumer who has received such a telephone call is asked to call the Attorney General’s Consumer Fraud Hotline: 800-386-5438 (Chicago); or 800-243-0618 (Springfield); or 800-243-0607 (Carbondale).

Question 4: How do I protect myself against fraudulent charitable solicitations?

After disasters, con artists often pose as charitable organizations to solicit contributions. If you wish to contribute, be wary of the following red flags:

1. The charity uses a name that sounds like a better-known, reputable organization.
2. The solicitor cannot or will not answer basic questions about the charity.
3. The organization uses high-pressure tactics to obtain a donation.
4. The solicitor insists on payment in cash.
5. The representative of the organization asks to pick up your donation as opposed to allowing you to mail it.

Always check to see if the charity is registered with the Office of the Attorney General by calling 312-814-2595; TTY: 312-814-3374. If you feel a solicitation is suspicious, do not donate money and instead report the solicitation to the Office of the Attorney General.

Question 5: What are some of the other schemes I should be aware of?

Refinancing Schemes

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. They then pressure the homeowner to sign multiple agreements without sufficient time to review them or consult with anyone. The negative outcomes of such refinancing schemes include high processing fees, payments to bogus or phantom creditors and loan defaults. 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 usually 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/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 people in order to line their pockets. A few tips for consumers include:

1. 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.
2. Always interview several contractors and lenders. Check with friends or family for recommendations.
3. Research lenders, contractors, appraisers, etc. with the Attorney General’s Office or the Better Business Bureau. Check out their complaint history.
4. Never make false statements on a loan application. Any lender who allows this is fraudulent.
5. Do not let anyone convince you to borrow more money than you know you can afford.
6. Attend homeownership education courses. They are available through the U.S. Department of Housing and Urban Development (HUD) or counseling agencies.

Foreclosure Consultants/Equity Strippers

After a natural disaster, a homeowner may fall behind in the payment of his or her mortgage or real estate taxes, resulting in a mortgage foreclosure or a tax sale of the home. Some financial predators prey on persons subject to these actions. The predator claims to be a foreclosure or distress expert who can assist the homeowner. The scam works in a variety of ways, but it usually starts when someone promises the homeowners that he or she will solve all their problems and keep them in their home. Unfortunately, it usually ends with the homeowner losing all equity in the home and/or being evicted.  A home’s equity is the difference between the value of the home and its liabilities. For example, a homeowner with a house worth $150,000 who owes $80,000 on a first mortgage and $20,000 on a home equity line has $50,000 in equity, which is the $150,000 home value minus the $100,000 in loans.    The scammer may promise loan money that never appears, may represent that he or she can buy you time or that he or she can save your home. It often involves the homeowner signing a lot of documents.

“Buy You Time” Scam

For a hefty fee, mortgage rescue consultants promise to "buy you time" and possibly save your home by negotiating deals with your creditors. They may also offer to help you repair your credit and refinance your existing mortgage. While these services sound appealing, the truth is that they can be performed better by a licensed attorney, by a reputable non-profit housing counselor, or even on your own. All too often, mortgage rescue consultants offer homeowners phantom help. They either do nothing they promised to do, or they do the bare minimum, perhaps placing a phone call to the homeowner's bank or mailing the homeowner a list of refinancing sources they found on the Internet. Either way, mortgage rescue consultants essentially abandon the homeowner to a foreclosure that might have been prevented with professional intervention. The Illinois Mortgage Rescue Fraud Act (765 ILCS 940/1 et seq.) protects consumers against the “buy you time” type of scam with the following key provisions:

1. Mortgage rescue consultants must give homeowners a written contract listing all the services that the consultant promises to perform.
2. Homeowners have the right to cancel a consultant contract at any time.
3. A consultant cannot accept any payment from the homeowner until all of the services have been performed.
4. “Save Your Home” Scam

Beware of any person or company offering to “save your home”. Falling for one of these schemes could result in not only losing the equity that you have in your home, but also being evicted. The scammer offers to purchase the home and either give the owners an option to buy it back when they are financially back on their feet or offers to let the owners live in the home for the rest of their lives. Through misrepresentations as to the home’s value and liens, the scammer buys the home for below-market value. Then he sells the home to a third party, often not telling the third party about the promise to the old owner to either buy it back or the life-long lease. The new owner then commences an eviction against the old owner.

The Illinois Mortgage Rescue Fraud Act protects consumers against the “save your home” type of scam with the following key provisions:

1. A mortgage rescuer must provide the homeowner with a written contract that clearly states that the home is being sold.
2. Prior to sale, the rescuer must make a determination that the homeowner has the reasonable ability to make rental payments and buy the home back.
3. A homeowner who remains in the home under a rental agreement has the right to cancel the rental agreement at any time.
4. A mortgage rescuer must pay the homeowner at least 82 percent of the home's fair market value if the rescue ultimately fails.

If you think you are a victim of either of these scams, please contact the Attorney General’s Consumer Fraud Hotline: 800-386-5438 (Chicago); 800-243-0618 (Springfield); or 800-243-0607 (Carbondale).

Caretaker/Befriender/Relative Scams

Unfortunately, even friends, relatives and caretakers often perpetrate fraud on the disaster victim. They may 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. All of these persons use scare tactics to convince the elderly, disabled or limited English or non-English speaking person 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 agent under the power of attorney may convey or encumber the property and keep the proceeds for him or herself.

Question 6: What Illinois laws address home solicitation contracts?

Special laws cover home solicitation sales in Illinois and in other states. Section 2B of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq.) provides that in a sale of merchandise involving $25 or more to a consumer by a seller who is physically present at the consumer’s residence, that consumer may avoid the contract or transaction by notifying the seller within three full business days following that date and by returning to the seller, in its original condition, the delivered merchandise. Section 2B imposes certain duties on a seller, such as providing the consumer with a fully signed contract containing a “Notice of Cancellation” provision, informing the consumer of his or her rights.

To download the full Disaster Legal Services Manual, please click here.