As many Americans recover from the superstorm Sandy, which left more than 8 million without power and has caused an estimated $50 billion in damages so far, they now face another threat, say consumer advocates: storm-related scams.
While crises bring out plenty of people looking to help, they also bring out people looking to take advantage of victims. "It's something we see after every storm, in some regard," says Randy Allen, associate dean at Cornell University's Johnson Graduate School of Management. Fraud was so rampant after Hurricane Katrina in 2005 that the government created a federal task force, now called the Disaster Fraud Task Force. (To date, it has prosecuted 1,439 individuals for fraud perpetrated during Katrina and Rita.) Still, advocates say the same problems have popped up after big natural disasters like last year's earthquake in Japan and Hurricane Irene, and even smaller storms.
And experts predict the same could happen with Sandy. Groups as diverse as the FBI, IRS and Better Business Bureau have already warned consumers of the potential for problems such as phishing attempts in the guise of charity websites and fake contractors that could steal cash from homeowners in need of roof repair.
For those caught in the storm's path, such scams can be harder to spot. Without power, it's not easy to check the credentials of a contractor that shows up at your house, or review pre-storm prices for something like a generator. Homeowners in need of immediate help face even greater danger. For example, if your basement is flooded, or there's a downed tree in your living room -- a business offering on-the-spot assistance may seem like a convenience. But it's rarely a smart option, says Mitchell Freedman, a certified public account and financial adviser based in Westlake Village, Calif.
Below are four of the most common post-storm scams advocates say consumers may encounter as Sandy moves on.
That's the moniker consumer advocates give to business people -- legit or not -- who swarm into areas recently affected by storms to offer auto repairs, home contracting for damage, or insurance adjustments. "Generally speaking, these people are not the Good Samaritans you think they are," says Cheryl Reed, a spokeswoman for review site Angie's List. The less scrupulous offer a big discount in exchange for cash up front, and then disappear without doing any work, she says. Or they might use high-pressure sales tactics to get homeowners into a contract, resulting in an inflated price or work that is done badly, with little recourse against the contractor.
Even those legit contractors who head into a damaged area from other states may not be the best bet for repairs, says Freedman. A contractor who isn't licensed and insured to work in your area could inadvertently add to costs by not applying for the right local permits, or triggering an insurance headache for you if he gets injured on your property.
Homeowners best bet is to research reputable local repair companies to reach out to, rather than rely on whoever shows up, says Reed. (If you're without power, call Information, or use a smartphone to research.) Get at least three estimates. Don't sign a contract until you've had a chance to chat with your insurance company and review both the offers and company's credentials, says Freedman. Never pay in cash, either, advises the Better Business Bureau.
Consumers who want to donate cash or goods to help out after a natural disaster should be careful which organizations they give to, experts warn. "Whenever there's a situation where scammers can prey on the kindness of people, they'll do it," says Freedman. Scammers may set up a look-alike site that mimics that of a legit charity, to phish for financial details. You might also be approached in person, or get a phone call from someone claiming to represent a charity, he says.
It's better not to give on the spot, but if you do, keep the donation to spare change, Freedman advises. Do due diligence on larger donations that require pulling out a credit card or checkbook. For details on how to maximize charitable donations. See our guide to Sandy relief efforts.
It may not be your imagination if prices for bottled water, gasoline or home-repair materials seem to have doubled overnight. "The opportunity for price gouging is there, when supply is short," says Allen. The practice is less common among big-box retailers, where pricing tends to be more standardized store to store, she says. Shoppers best recourse: take note of typical prices for needed items online while they still have power to avoid bad deals.
Consumers may find it helps to complain to the state attorney general. States have taken a more serious look at price gouging in recent years, strengthening laws and pursuing action more vigorously against businesses that may have overcharged consumers. (Generally, businesses need to keep prices at pre-emergency levels to avoid civil and criminal penalties -- unless they can provide proof that they have incurred higher costs that justify the hike.)
New Jersey Governor Chris Christie spoke out in advance of Sandy's arrival about price gouging, noting that the rules went into effect as soon as a state of emergency has been declared. "During emergencies, New Jerseyans should look out for each other -- not seek to take advantage of each other," the governor said Saturday. "The State Division of Consumer Affairs will look closely at any and all complaints about alleged price gouging." The state recently levied a $50,000 penalty against a New Jersey gas station that upped prices by more than 15% in connection with Hurricane Irene last year.
It's not just consumers in Sandy-affected areas who should be wary. Experts say cars damaged by floodwaters can often turn up for sale within weeks -- in states unaffected by a storm. The cars can have electrical and mechanical problems from their time submerged, which can lead to expensive repairs for their new owners. It can also make them unsafe. "Salt water can eat its way through the insulation and the wiring and cause malfunctions," says Phil Reed, senior consumer advice editor for Edmunds.com. "You can dry out the car, but it's never quite the same."
Spotting a damaged car isn't easy, since they often turn up for sale before there are obvious signs like mildew. But experts say consumers can generally avoid problems by getting a vehicle history report: damage from flooding should be noted. It's also smart to have a car checked by your mechanic before purchasing if you suspect there's a problem, Reed says.