For years, unscrupulouscontractors have manipulated homeowners into signing shadycontracts that invariably lead to subpar repairs andfraud. The predatory practice not only victimizes consumersbut also affects property values and drives upinsurance premiums.

Maryland is one of many states to seeka legal remedy and just yesterday approved a billthat will ostensibly deter the crime. In a move endorsed byThe Coalition Against Insurance Fraud (the Coalition), Gov. MartinO'Malley signed a new law forbiddingcontractors from offering rebates.

“The door was slammed on a shameful ruse that lets crookedcontractors invade a homeowner's castle to do shoddy and inflatedrepairs,” says Howard Goldblatt, the Coalition's director ofgovernment affairs. “Prosecutors now have a focused legal tool thatcan better sweep cheating contractors off the streets.”

Goldblatt deemed the law “a foresightful consumer protection,”praising both Gov. O'Malley and the Maryland legislature, notingthat SB 736 overwhelmingly cleared the General Assembly thisyear.

Shady contractors often use rebates of insurance deductibles toconvince homeowners to sign contracts. Once in the front door,quite literally, dishonest contractors are free to try and defraudhomeowners and their insurers.

“The money that contractors steal through the repair project canearn an illicit and inflated profit that easily offsets thedeductible they paid,” Golblatt explains. “Honest contractors withgood reputations do not need to dole out backhanded bribes toearn repair contracts. Rebating is a last-ditch ploy byoften-incompetent contractors who can't earn businesshonestly.”

Post-Cat Cons

Rebating offers are especially common after storms sweep throughneighborhoods and cause considerable home damage. Storm-chasingcontractors, often unlicensed and out of state, typically seekbusiness by knocking on doors, the Coalition notes.

The lure of saving hundreds of dollars can carry a cerainappeal to distressed homeowners, who may urgently need repairs todamaged roofs or other parts of the home structure.

“Once contractors gain access to the home, they may demand alarge down payment and then disappear without doing any work,”Goldblatt says.

When inflated repairs are actually made, they can beshoddy, using substandard materials. In fact, the Coalitionnotes some contractors have even used tree limbs to enlarge holesin roofs and fraudulently inflate insurance bills.

Fixing up poorly executed repairs can obviously takean emotional toll on homeowners. Moreover, a homeowners'insurance policy may not be obligated to cover the cost offraudulent repairs.

Goldblatt stresses the importance of educating consumers aboutthe flipside of rebates. It's likely that other states may followMaryland's lead, too.

“Public and private agencies should continuously educatehomeowners about the rebating ploy and other contractor scams,”Goldblatt says. “Educating consumers must happen well before stormsstrike. Once the storm hits and dishonest contractors swoop in,that may be too late.”