Consumer Agency: Watch for Loan Scams

The Consumer Financial Protection Bureau is warning of a common disaster scheme. Be careful seeking contractors after Sandy.

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Hurricane Sandy may bring all kinds of vermin to the surface – and we’re not talking about the rats. We recently wrote you need to watch out for Sandy scammers, and the Consumer Financial Protection Bureau is now warning of a particular scheme…

A contractor calls or knocks on your door and offers to install a new roof or remodel your kitchen at a price that sounds reasonable. You tell him you’re interested, but can’t afford it. He tells you it’s no problem—he can arrange financing through a lender he knows. You agree to the project, and the contractor begins work.

At some point after the contractor begins, you are asked to sign a lot of papers. The papers may be blank or the lender may rush you to sign before you have time to read what you’ve been given. The contractor threatens to leave the work on your house unfinished if you don’t sign. You sign the papers.

Only later, you realize that the papers you signed are a home equity loan. The interest rate, points and fees seem very high. To make matters worse, the work on your home isn’t done right or hasn’t been completed, and the contractor, who may have been paid by the lender, has little interest in completing the work to your satisfaction.

Check out the CFPB post for tips on avoiding the scam and how to find reliable help.

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