Scam artists come out of the woodwork after natural disasters, taking advantage of the chaos, panic, and distraction. As the Northeast picks up and dries off from the devastation wrought by Hurricane Sandy, there are bound to be crooks looking for ways to rip people off. A whole host of scams are associated with natural disasters. The FTC has a list of 21 ways that creative criminals separate victims from their money on its Hurricane Recovery webpage, and the Credit Union National Association issued a bulletin last month warning its member institutions to watch out for seven different types of post-disaster scams.
The variety is almost endless: Some crooks charge fees for loans that have terrible terms or never materialize at all. Some promise to repair appliances, vehicles, or other property but, after accepting full or partial payment, either do the job poorly or don’t do it at all. Others make money selling water-damaged cars to unsuspecting customers. Identity thieves prey on people who are displaced or need help, sometimes by pretending to be government agents on the scene to help.
You don’t even have to be directly affected by the hurricane to be a target. Securities lawyer Andrew Stoltmann says some scammers approach investors with penny stock pitches tied to hurricanes, claiming that investing in certain companies involved in disaster cleanup, energy, or homebuilding will pay off big. Often the companies don’t exist or have no role in hurricane clean-up. Such scams were prevalent following Hurricane Katrina in 2005, he says.
Here’s a closer look at the two most common types of post-disaster swindles:
Home Improvement Scams
Unscrupulous contractors often promise to make repairs but, after taking the money, either do the job poorly or don’t finish. Some charge little to get started but then demand additional money to finish the job, or trick people into signing up for high-fee loans by inundating them with paperwork they know most people — especially those with missing walls or holes in their roofs — won’t take time to read.
“Insurance settlements and flood relief from the federal government to property owners can provide con artists with opportunities to profit unfairly. It’s no secret that fraudsters follow the money, attracted by the demand for repairs and the availability of funds,” the FTC warns.
Such scams aren’t limited to general contractors. The FTC warns people to be wary of anyone who promises to provide other disaster-related services like debris, mold, or pest removal, water purification, or flood restoration.
To avoid being defrauded, start by asking friends, family, or claims adjusters for referrals. Be suspicious of anyone who just shows up and offers to do the job, especially if they offer you a great deal on supplies “left over from an earlier job.” Ask to see licensing and insurance information, and verify with the agency that issued their credentials as well as the insurance company to make sure they’re on the level.
Get everything in writing, and make sure you have time to read the contract fully. A contractor who pressures you to sign without reading the contract, or wants you to pay in full before starting the job, should be a red flag. (The FTC says a pre-work deposit of one-third the total cost is standard.)
Finally, don’t ever pay cash. If you’ve gotten a check from your insurance company, arrange to get a certificate of completion from your bank, which lets the institution dole out the money in installments based on your satisfaction with the work as it progresses. Or pay with a credit card, which gives you the option of disputing the charge if the work is shoddy or incomplete.
Charitable Donation Scams
If you want to donate to help disaster victims, make sure you don’t become a victim yourself by giving money to a scam artist. Some charities try to hide the fact that the lion’s share of donations go to salaries and administrative costs rather than to people who really need the assistance. You can check out a charity’s commitment to its cause by going to a website like CharityNavigator.org. The Better Business Bureau also provides reviews of charities on its website.
In general, CharityNavigator says, “The most efficient charities spend 75% or more of their budget on their programs and services and less than 25% on fundraising and administrative fees.”
In other cases, there isn’t a charity at all; crooks just take your well-intentioned donations and pocket them. To prevent this from happening, watch out for fake charities that have names that are similar to legitimate nonprofit groups; avoid donation pitches that you get via email; and be wary of claims that 100% of the donation will go to victims, since all charities have legitimate expenses.
“Donate to recognized charities you have given to before. Be on the alert for charities that seem to have sprung up overnight. They may be well-meaning, but they lack the infrastructure to provide assistance,” the FTC advises.