KPM

Executive Fraud

Ready to Rebuild? Beware of Disaster Scams.

When disaster strikes, the number of fraud incidents always skyrockets. According to a working group of government officials formed to fight Hurricane Harvey–related fraud, authorities have already received hundreds of complaints. Here is how homeowners and businesses trying to rebuild can protect themselves from shady contractors.

Vet contractors carefully

Construction fraud is common following a disaster because victims want to return to normal as soon as possible and may not vet contractors as carefully as they would in better times. If you need repairs, work with your insurance company to learn what is covered. Your insurer will probably send an adjuster to evaluate the damage and give you a ballpark estimate of costs.

Next, take the time to obtain several bids and review them carefully. Be sure the bids specify exactly what work is included, all costs, and a time frame for completion. Beware of anyone who looks or acts unprofessional or offers to save you money by using materials left over from another job. You may be agreeing to shoddy components or unsafe workmanship. Finally, ask for a state contractor license number and proof of insurance.

Get it in writing

Once you have found a contractor, make sure everything about the job is in writing. Be careful not to sign the contract until all the blanks have been filled. Do not pay in full until the work is completely finished, including site clean-up. Also, do not pay more than the amount in the contract, even if the contractor claims the cost of materials went up unexpectedly. A written change order should be agreed to for any changes made to the contract terms, including price.

Most states have laws regarding liens placed against property by contractors or suppliers. Before you make your final payment, ask the contractor to sign a Release of Lien form or a release of all liens (including subcontractor liens).

Let the government help

A final warning: some scammers pose as government officials. Ask to see photo IDs from anyone claiming to work for the Federal Emergency Management Agency (FEMA) or the U.S. Small Business Administration (SBA). Note that FEMA and SBA inspectors do not charge for their services or solicit information such as credit card numbers.

If you are defrauded or suspect criminal activity in a disaster zone, contact the Justice Department’s National Center for Disaster Fraud. For help rebuilding financially, contact us.

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