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Contractor Promising To "Save Your Deductible" On Home Repairs? That's Illegal

The BBB advises consumers to be wary of contractors who illegally offer to "save your deductible" on home repairs after storms or other disasters.

Whenever storms wreak havoc on houses, storm-chasing contractors start canvassing neighborhoods for business. Many times, they offer to "save your deductible" or discount repairs by the amount of the deductible.

In some cases, the contractors sign you up for repairs but never complete the job or do shoddy work. When you try to find them to get a refund or address problems, they're long gone.

Last year, the Missouri General Assembly passed a bill making it illegal for contractors to offer this or other inducements to obtain contracts. Illinois has had a similar law for years.

The BBB has challenged 21 advertisements with illegal offers since the April 28 hailstorm that damaged many St. Louis area homes and businesses. We've taken hundreds of calls from consumers seeking information about contractors, both legitimate and not.

We encourage every consumer to check businesses out with the BBB before signing a contract. Today's release includes tips on what to look for when you hire a contractor.

St. Louis, Mo., July 24, 2012 – The Better Business Bureau (BBB) is urging homeowners to be cautious when approached by companies promising to save their insurance deductibles on storm damage repairs.

Missouri and Illinois prohibit advertising any rebates, discounts or prize offers which might be considered inducements to hire contractors.

Carole Bellman, BBB advertising review director, said that even though special offers to save deductibles can seem enticing to homeowners, they may be considered insurance fraud.

"Residential contractors—like roofing companies and siding repair firms—should be very careful when trying to attract customers,” she said. “They need to read the law and understand what it means.” She also warned that some companies may inflate their prices to cover special offers.

Bellman said that the St. Louis BBB has challenged 21 advertisements from local contractors since the April 28 storm.

The BBB’s Code of Advertising states: “Advertisers, agencies and media should be sure that they are in compliance with local, state and federal laws and regulations governing advertising.” The primary responsibility for truthful and non-deceptive advertising rests with the advertiser. “Ads which are untrue, misleading, deceptive, fraudulent, falsely disparaging of competitors, or insincere offers to sell, shall not be used,” the code says.

One of the challenged ads came from an Overland, Mo., roofing company. It stated, “We will save your deductible.”

A St. Louis contractor’s ad said: “FREE ROOF, GUTTERS SIDING... We cover your deductible...YOU PAY NOTHING OUT OF YOUR POCKET. WHEN WE SAY FREE, WE MEAN FREE!”

Most contractors contacted by the BBB said they were not aware of the advertising restrictions and said they would change their ads.

The Missouri law, passed last year as Senate Bill 101, states, in part, that a residential contractor “shall not advertise or promise to pay or rebate all or any portion of any insurance deductible as an inducement to the sale of goods or services.” The law further says that the restrictions include “granting any allowance or offering any discount against the fees to be charged or paying the insured or any person directly or indirectly associated with the property any form of compensation, gift, prize, bonus, coupon, credit, referral fee, or other item of monetary value for any reason.”

The Illinois law bars home repair and remodeling contractors from advertising or promising to pay or rebate “all or any portion of any insurance deductible as an inducement to the sale of goods or services.” The ban includes ”granting any allowance or offering any discount against the fees to be charged or paying the insured or any person directly or indirectly associated with the property any form of compensation.”

The BBB regularly reviews local advertising as part of its role as a self-regulatory organization. The BBB promotes ethical selling and advertising practices through standards developed and generally adhered to by industry members.

The BBB offers the following tips to consumers hiring roofers or other contractors:

  1. Beware of possible scams. Watch out for contractors in unmarked trucks or for companies requiring advance payment. Don’t succumb to high-pressure techniques, such as notices that the price is good for one day only.
  2. Try to verify the business’ true identity. Get a business card and a physical location of the company. It is always better to deal with well-established businesses in the area than those that come in from out of state and may not be around to honor warranties.
  3. Ask for references. Make sure the company that wants your business has satisfied customers.
  4. Read contracts carefully and make sure you understand what you are signing. Watch for language that may require you to pay a fee if you decide to cancel.
  5. Understand that when an insurance company issues a settlement check for damages, that payment is going to you, not to the contractor. Just because you have been dealing with one company doesn’t mean you can’t decide to hire a different one if you are uneasy about the first.
  6. Do not pay the full amount in advance of the work being completed. A good rule of thumb is to pay one-third when the contract is signed, another third while the job is underway and the final third when you are satisfied with the completed job.
  7. Check a company’s BBB Business Review by going to www.bbb.org or by calling 314-645-3300.

The BBB is a nonprofit, business-supported organization that sets and upholds high standards for fair and honest business behavior. The BBB provides objective advice, free BBB Business Reviews on more than 4 million companies, 11,000 charity reviews, dispute resolution service, alerts and educational information on topics affecting marketplace trust. Please visit www.bbb.org for more information.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Phil Gonzalez July 26, 2012 at 08:59 AM
What is ILLEGAL is for Insurance companies to deduct false, purposely inflated "salvage" value on your hail damaged vehicle. My friend had hail damage on his 1999 truck that exceeded the value of the truck. His insurance company falsely claimed they could get over $2150.oo in salvage value. When he investigated & found the named "salvage" company, they told my friend they would give no more than $850.oo. This is a true story. I have repeatedly told my friend to take this to the prosecutor & file charges against the agent AND the insurance company. Since the amount attempting to be defrauded is over $750.oo, this is attempted felony fraud AT LEAST.
Phil Gonzalez July 26, 2012 at 09:03 AM
The BBB, a.k.a. Better Business Bureau, actually DEMANDS PAYMENTS of 2 % of your gross sales plus a membership fee determined by your gross sales to be a member of the BBB in good standing. The BBB extorts this money by claiming BBB has either potential customers asking about your business or customers complaining about your products or services. Since BBB has NO first hand knowledge of your business, BBB is repeating UNSUBSTANTIATED claims by 3rd parties & ATTEMPTING TO PROFIT from this. Does that NOT sound like extortion to you?

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