In the wake of catastrophic events, much of the wreckage is obvious to the naked eye. Floods caused by Hurricanes Harvey and Irma have left behind massive amounts of property damage. It's expected to take years to recover. During and after these types of events, we often see the best of humanity: rescues, donations for relief efforts, foster homes and shelters for displaced pets, and communities coming together to rebuild.
Unfortunately, amid natural disaster, there's also an opportunistic side to our human nature. We see this in the form of fly-by-night contractors, "storm chasers" who take advantage of homeowners, or car salesmen selling flood damaged cars while not disclosing it.
In the CNN "Storm Chasers" article, a Justice Department spokeswoman said that more than 1,400 people had been prosecuted for Hurricane Katrina-related fraud. A fraud task force that has expanded post-Katrina has referred more than 50,000 cases to law enforcement.
Exploitative contractors have been known to come into areas that have suffered from natural disasters looking to make a quick buck off victims. They'll often demand payment up front, begin shoddy repair, and skip town before finishing the work. Frank Scafidi of the National Insurance Crime Bureau told CNN Money, "We've seen it after every disaster, and we don't expect anything different once heavy Harvey-induced floods recede."
A 2016 Business Report article offers the following tips for hiring a contractor after a flood:
- Avoid large down payments. If a contractor asks for a down payment of more than 25% of the total cost, don't agree to the deal. A reputable contractor won't ask for more than 10% to 25% of the total cost. Don't pay in cash. Take photos or make copies of checks and money orders for the down payment.
- Verify the contractor's address. Make sure they have an established business operation. Ask for references from previous customers. If you can, inspect the work that's been done for these customers.
- Check the materials. If possible, accompany your contractor to the building supply store. Have the materials delivered directly to the jobsite rather than the contractor's shop.
- Get a written contract. Have a signed, legible contract, and keep it in a safe place.
- Demand insurance. Require the contractor show proof of insurance, and call their insurer to confirm they have coverage–don't simply take their word for it.
- Find three bids. Get three itemized and detailed bids from contractors (make sure they're bidding on the same work). The more bids you can choose from, the better.
- Confirm their license. Make sure they're licensed through your state licensing board.
- Take photos. Take a picture of your contractor, their vehicle and its license plate, as well as their business card. Take photos of the contract you signed with them, insurance information, their contracting license, and all checks and money orders sent to the contractor (don't pay in cash). Preserve these photos in a safe place, preferably on a cloud service.
While contracting and home repair scams are going to be focused on flood damaged areas, it's the cars that will see a wider radius of distribution where they can be sold to unsuspecting buyers. The recent floods in Texas and Florida are expected to over leave over a million flood-damaged vehicles behind. U.S. News & World Report states that Carfax estimates that more than 50% of cars that are damaged by a flood are eventually resold.
Buying a flood-damaged car comes with inherent risks. A car that was once waterlogged may have long term reliability, durability, and safety issues. Mold and mildew can grow in the soft areas of the car and compromise you and your passenger's health. Waterlogged airbags may not deploy. Saltwater can breakdown the fabrics used in seatbelts. Additionally, saltwater damage continues to corrode and eat away at a vehicle's body and operation components. Consider that many modern vehicles have complex computer and electronic systems.
Al Hatcher, a used car salesman at Acura of Chattanooga told WRCB Chattanooga, "It can be a year before the corrosion starts causing shortages on the car, the salt water does speed that up quite rapidly but regular water does the same thing." Hatcher warns buyers, "Good cars aren't cheap; cheap cars aren't good. If they see a deal out there that's just too hard to believe there's a reason…Look further into that."
Scammers are disguising severely damaged vehicles and trying to sell them as quickly as they can, trying to stay ahead of an insurance industry inundated with flood claims before the vehicles can be entered into a database as a total loss. By the time the consumer discovers the vehicle's history, it's too late and the seller is long gone. While the car may seem to operate just fine, if it was a deemed total loss, it may be difficult and cost prohibitive to get a salvage title.
If you are considering purchasing a used vehicle, and you suspect it could have been damaged by recent floods, U.S. News & World Report offers the following tips to avoid buying a flood-damaged car:
- Research the car on-line. Check the vehicle on Carfax. You can also access the National Crime Insurance Bureau's free VINCheck to determine if a vehicle's been reported stolen, but not recovered, or if it's been reported as a salvage vehicle (though, keep in mind, the goal of the fraud is to sell the vehicle before it's VIN is entered into a database).
- Flooded Cars Sometimes Travel. While many flooded cars will remain in or near the states that flooded, they can be easily transported virtually anywhere in the country. It's a good idea to have a reputable mechanic give it a thorough inspection.
- Inspect the Car. Here are some indicators you may be able to find on your own.
- Stains and Discoloration. Look for stained, discolored seats, upholstery, carpeting, or door panels.
- Electrical Components. Do some lights work and others don't? That may be a problem. If the vehicle has an infotainment system, is it properly working?
- Dashboard Warning Lights. If these are on, it may be for a good reason. Don't let the reseller simply reset them; you need to understand why they were on in the first place.
- Mud & Silt in Out-of-the-Way Areas. Use a flashlight. Is it clean under the dash? Are any wires discolored or brittle? Check under the seats. Any evidence of mud, silt, or that it's been recently cleaned? Check the glove box. If the car was underwater, it may show signs of it. Check the trunk for any residue of mud and silt.
- Musty Smell. Close the doors and roll up the windows. Does the vehicle have a musty smell, like mold or mildew? That's a good indicator of water damage.
- Check Underneath the Car. Is there any evidence of mud or vegetation?
Be vigilant. If you're in an area that's been damaged by a natural disaster, be wary of opportunistic predators looking to take advantage of the situation. A report by The Washington Post warns of scammers making robocalls to tell people that their premiums are past due and that they must send money immediately or their flood insurance will be cancelled. While these robo-calls may have been targeted to homeowners, keep in mind that fraudsters are innovative in their technique and often cast wide nets in hopes of catching those with their guards down. If you're not sure about the person you're speaking with, ask for identification, their phone number, their supervisor. Ask for them to send this "cancellation notice" in writing. Ask what specific policy number they're referencing (they likely wouldn't–and shouldn't–have this info). And don't send payment or provide credit or debit card information over the phone or online to someone you don't know. Verify with your insurance carrier. It's unlikely they would call you and demand payment. You would most likely receive a cancellation notice in writing if you were behind on payment.
It's unfortunate that there are those who look to take advantage of others after a natural disaster. But if you take precautions and don't rush into anything involving money, you should be able to protect yourself. And if you're not certain, call your local authorities.
One last note: As many Americans are looking to help with relief efforts in any way they can, it's also important to be mindful of the charity you're contributing to. Fraudulent charities are also prevalent in the aftermath of a natural disaster. Per NPR, scam charities raised hundreds of thousands of dollars after Hurricane Sandy. NPR has compiled a list of tips from Federal Trade Commission to avoid donating to a scam charity.
Below are helpful phone numbers and links:
National Insurance Fraud Bureau or call 800.TEL.NICB, Cell phone users can text the word "FRAUD" and their tip to TIP411.
iPhone and iPad users can download the NICB Fraud Tips App