Community Legal Aid Society, Inc. (CLASI) represents individuals aged 60 and above in some consumer matters. However, at the present time due to limited funding CLASI does not represent low-income individuals in consumer matters. Low-income individuals with consumer problems should contact the Legal Services Corporation of Delaware (LSCD) by calling 302-575-0408. LSCD is a legal services provider similar to CLASI that provides free legal services to low-income people in Delaware. In addition, some assistance may be obtained from the Consumer Protection Unit of the Delaware Office of the Attorney General. The Consumer Protection Unit may be contacted at 1-800-220-5353. We provide a link below which will give you further information from the Consumer Protection Division as well as other links which may prove useful. We hope that the information provided below is useful to you. However, when confronted with a legal problem it is always wise to consult with an attorney. The information provided below is not intended nor should it be used as a substitute. Disclaimer
Tips for Hiring a Contractor to Make Home Improvements
Fall is often a time for home improvements. If you are considering a new roof, driveway, addition or other improvement to your home, remember these tips:
- You often will not get the best price or workmanship from someone who solicits you on the phone or at your door;
- Always obtain several estimates in writing before choosing a contractor;
- Ask to see the contractor’s business license and check his or her record with the Better Business Bureau;
- Do not feel pressured to sign a contract; you have the right to think it over;
- Make sure the contract:
1. is in writing;
2. is signed by the contractor;
3. describes in detail the work to be done; and
4. lists a time frame for completion of the work.
Remember that anything not in the contract will be unenforceable in a court of law; and
- Do not pay the full price before the work is completed to your satisfaction.
Personal safety is an important issue for most people. There are companies, however, that will prey on your fear in order to make money. You should not be manipulated or pressured into signing a contract for a security system that may later become a burden to you.Often security system contracts require an initial payment of money followed by a monthly service fee. You may be asked to sign a “Retail Installment Contract” for a term of up to five years. If your circumstances change and you cannot afford the payments, or if you become unhappy with the service, it will be difficult, if not impossible, to break the contract. If you fail to make a payment, the company may declare the entire balance to be due immediately. Never sign a security system contract without reviewing it out of the presence of the salesman. Consider asking a lawyer at the Elder Law Program to review it. If the salesman offers you a lower rate for signing immediately or agreeing to a longer term than you might like, you should be worried. The salesman knows that the more time you have to consider his offer, the more likely you are to refuse it.Sometimes what the salesman tells you and what you actually receive are two different things. You may be told that your alarm connects directly to a police station and that an officer will respond in minutes if there’s a problem. However, the contract may simply provide that an alarm will sound with no connection to an emergency service. You may later be told that the service described by the salesman is only available at additional cost. If the security system fails and your home is burglarized, you may discover that the contract limits the company’s liability to $250. (For this reason, you need to maintain your homeowner’s insurance policy even if you have a security system.)You may experience problems with your security system. Once the sale has been made, the company may be reluctant to come to your house to perform maintenance, or they may charge you for repairs.What happens if you sell your home? Often security system contracts provide that there’s no right of assignment or that you must get permission from the company. Thus, you could sell your home and still be liable for the monthly service fee for the remainder of the contract.
A reverse mortgage is a type of home equity loan that can be a useful tool but also a dangerous trap. It can provide an additional monthly income stream or a lump sum of money. A reverse mortgage can be like spending your life savings, however, and it requires careful consideration and planning.In a traditional mortgage, the bank lends the borrower cash with the house used as collateral. As the borrower repays the loan, the bank’s claim on the home equity shrinks until gradually the homeowner’s equity is 100% restored. At the end of the loan, the homeowner owns the full equity in the home which can be tapped into if necessary.A reverse mortgage works differently. The lender gives the homeowner cash in one of several basic forms. The lender might provide fixed monthly installments over a period of time (“term”) or for as long as the borrower lives in the home (“tenure”), or the lender might provide a lump sum or a line of credit. In most cases, the homeowner will not have to repay the loan as long as he or she continues to live in the home. The loan is repaid to the lender when the homeowner moves, dies, or otherwise transfers title to the home.The catch is that the cost of a reverse mortgage may be surprisingly high. There are costs to be paid up front, such as closing costs, origination fees, and insurance premiums. Also, interest is added to the balance and compounded, which means you pay interest on unpaid interest. For example, if you obtained $10,000 through a reverse mortgage, you could be required to pay thousands of dollars in closing costs. If you sold the home 10 years later, you would owe the lender much more than $10,000 because the interest would have accumulated. Thus, you would receive less money upon the sale of your home.
Mortgages - Reading The Fine Print
When applying for a mortgage, it is important to read the fine print. The loan documents will often contain unfamiliar terms. Take all the time you need, and do not allow anyone to pressure you. Some terms you should be aware of include the following:
Balloon: Balloon mortgages provide for a series of payments with a large final payment. For example, you may be required to pay only $75 per month for the first year, with a balloon clause requiring the balance of the mortgage to be paid in its entirety when the year ends.
Note: You will usually be asked to sign a Note along with the mortgage. The mortgage document allows the bank to sell your house if you default, while the Note makes you personally liable and allows the bank to go after your other assets if you default.
Acceleration: Most mortgages have an acceleration clause. This clause provides that if you default on your payment obligation, the bank may declare the entire loan balance to be immediately due in full.
Notice: Always review your loan documents to determine what type of notice the bank must send you in the event you default. Determine whether the contract allows you time to “cure” the default.
Rider: A rider outlining additional terms may be attached to your mortgage. It should be read just as carefully as the mortgage.
Always make sure you have a full understanding of all applicable fees, plus the interest you will be charged and how it is computed.
Beware of Predatory Lending!
Pred•a•to•ry – adjective 1. of or living by plundering or robbing
2. preying on other animals
(Webster’s New World Dictionary, 1977, The World Publishing Company)Sometimes companies that loan money engage in what are called predatory lending practices. These practices trick people into borrowing money they don’t want, at high interest rates, and have high fees. Here are some tips to avoid becoming a victim of predatory lenders.
- Don’t accept the first loan you are offered. Shop around with different lenders, including traditional banks and other loan companies to find the best rates and terms.
- Don’t get talked into borrowing more than you need! Decide how much you need to borrow and what you are borrowing it to pay before you talk to a loan officer. Stick to that amount!
- For mortgages, do not borrow more than your home is worth. If you are getting a consolidation loan, make sure you get in writing who is getting paid and how much. Demand to see proof of any payments that are claimed to have been made on your behalf.
- Don’t borrow more than you can afford to repay! Before signing a loan agreement, make a monthly budget of all of your expenses. Get a written commitment of what your monthly payment will be on the new loan. If you cannot afford the monthly payment, do not take out the loan.
- Try not to take a mortgage on your home to pay other bills. If your bills are unsecured (credit cards, doctors), no one can take your house if you do not pay them. If you use a mortgage to pay the bills, you could lose your house if you miss payments!
- Be careful of balloon payments; fees for mandatory arbitration; fees that are more than 10-20% of the amount you borrow; and penalties for prepayment. If the loan you are offered contains any of these – keep shopping!
Choosing A Credit Card
- Be selective. Avoid carrying more than one or two cards.
- Lenders are aggressive and they may have a lot of information about you, including a marketing profile that shows your spending habits. They are looking for people who will run up big balances. Just because a company is offering you credit does not mean you can afford it!
- The interest rate is important, but a low rate may not be a good reason to accept a card. Sometimes there are other costs, such as annual fees, so that credit which appears cheaper is actually more expensive.
- Beware of temporary “teaser” rates. Often they are good for only a short period with a higher rate thereafter. The permanent long-term interest rate matters the most.
- If your rate is “variable” instead of “fixed,” make sure you understand how it may change.
- Beware of juggling cards and transferring balances. Paying off one card with another card that has a temporarily lower rate may not be helpful in the long-run and can negatively affect your credit record.
- Investigate whether late payment or penalty interest rates may be charged if you make a late payment or miss a payment.
- Always read the disclosures and the credit contract.
- Understand your credit card’s billing method.
- If you do not like a card, cancel it!
Credit Card Information You Should Know
Q. What if I need a new credit card to buy Christmas gifts?
A. Beware of ordering credit cards that are beyond your means. Banks will issue credit cards regardless of whether you can actually afford to make the monthly payments. They will consider your home and other assets when deciding whether to give you a card, but that does not mean you will be able to afford the payments. Also, banks may offer a low “teaser” interest rate, but then raise it significantly.
Q. My favorite niece wants me to co-sign her credit card application. I would like to help her out. Is that okay?
A. Don’t do it! You will be held solely responsible for all purchases your niece makes, even if you are “only a co-signor.”
Q. I can’t find my credit card. If it was stolen, will I be responsible for the purchases?
A. You should report the loss or theft of a credit card to the bank as soon as you become aware of it. If you report it promptly, you should not be required to pay for more than $50 of the unauthorized purchases.
Q. I lent my credit card to my son so he could buy some toys for my granddaughter. But when I got the bill, I saw that he had also used it at restaurants. Can I report the restaurant bills to the bank as “unauthorized purchases?”
A. If you lend your credit card to someone for a particular purpose, and they use it for some other purpose, you may still be held responsible for ALL of the purchases made. Never lend your credit card to anyone for any reason.
Q. I would like to stop using my credit cards. Can I just tear them up?
A. Yes, but you should also notify the bank, in writing, that you wish to close out your account. If you still have a balance the account will remain open but you may request that no further charges be authorized. After you have paid off the card you should order an inexpensive personal credit report from a credit agency such as Equifax, to make sure that your credit history is accurate.
Are You In Over Your Head With Credit Card Debt?
Senior citizens living on a fixed income often find themselves overextended with credit card debt. This can be very stressful, particularly if you have always had a good credit history. Credit card solicitation seems to be at an all-time high, and may be hard to resist in facing the high cost of living. If this sounds familiar, ask yourself these questions:
- Are you feeling harassed by debt collectors? If your account has been turned over to a debt collection agency, you can send them a letter telling them not to contact you. This will not erase your debt or stop any court action against you, but should stop the harassment.
- Are you still using your credit cards? If so, destroy them!
- Do you own more than $500 worth of property? Do you receive income other than social security? If the answer to both questions is “no,” you may be “judgment proof.” That means that even if a creditor sued you he would not be able to take any of your property.
- Do you have a job? If you are employed and a judgment is entered against you, the creditor may be able to obtain up to 15% of your wages directly from your employer. However, if you work part-time and your wages are minimal, the creditor may not be able to obtain any of your income.
- Do you owe your bank money? Generally, your creditors may not touch your social security. If you bank at an institution to which you owe money, however, you should change your account to a different bank. Otherwise, the bank may attempt to withdraw funds directly from your account to pay your debt.
Your Rights As A Debtor
- Congress created the Fair Debt Collection Practices Act to protect consumers from harassment. It only applies to “debt collectors” — usually companies or attorneys whose business it is to collect another company’s debts for a fee. It does NOT apply to creditors collecting their own debts. Under the Act, debt collectors may not:
- Contact you at unusual or inconvenient times and places (for example before 8 a.m. or after 9 p.m., or at your workplace if prohibited);
- Contact you if the debt collector knows you are represented by an attorney;
- Communicate with third parties about your debt (other than your attorney, the creditor’s or collector’s attorney, a credit reporting agency, your spouse, and codebtors);
- Communicate with others in an attempt to locate you unless certain requirements are met;
- Engage in harassing/abusive conduct, such as using profane language;
- Use or threaten violence or criminal conduct;
- Continually call you with the intent to annoy, abuse, or harass you;
- Contact you without disclosing their name and the company for whom they work;
- Misrepresent the imminence of a lawsuit or their intent or authority to sue.
What Can Filing Bankruptcy Do For Me?
Bankruptcy is a legal proceeding which allows you to get a fresh financial start when you cannot pay your debts. It can help you eliminate your debts (called “discharge”), stop foreclosure on your home to allow you to catch up on payments, or prevent repossession of your car or other property. It cannot, however, cure every financial problem, and it is not always the best option. In bankruptcy, you usually cannot eliminate debts to “secured” creditors (creditors who have a mortgage or other lien on your property as collateral for a loan).There are two types of bankruptcies for individuals: Chapter 7 and Chapter 13. Chapter 7 is known as “straight” bankruptcy or “liquidation.” Most debts are discharged but you may have to give up property which exceeds the Delaware exemption limit of $5,000 ($10,000 for a couple). In a Chapter 7 case, your debts are wiped out in exchange for your giving up non-exempt property. Property that is non-exempt is sold, although in many cases all of the petitioner’s personal property is exempt. A home with little equity may also be exempt.Chapter 13 is known as “debt adjustment.” It requires you to file a “plan” to pay past-due and current debts over a three to five year period. A Chapter 13 case allows you to keep valuable property such as your home or car if you can make “plan” payments to repay what is overdue and stay current. If your income is very limited, you may not have enough to fund a plan.Bankruptcy will affect your credit, but it is unclear to what extent. If you are behind on your bills, your credit may already be bad. Bankruptcy may not make things any worse.
Financing a New Car
Congratulations On Buying A New Car!
The good news is that you have a new car; the bad news is that your are paying an interest rate 5 percentage points above what you should be paying. What went wrong? You may be a victim of “Yield Spread Premium.”
Although it sounds like a new brand of margarine, this premium is actually bonus money a person receives for helping you obtain financing that is not in your best interests.The average buyer does not have enough money to pay cash for a car. The salesman knows this and after getting the buyer to focus on a particular vehicle, he will quickly launch into a discussion about financing. If he is a good salesman, he has already won the buyer’s trust. The salesman may ask the buyer to fill out a credit application. After that he may fax the information to a financing company — maybe even a company owned by the car dealership. The financing company may say, “Based on the customer’s credit history, we can offer a rate of 9%.” The salesman may then go back to the buyer and say, “I can offer you a fabulous credit package at 14% interest, which is a great rate.” If the buyer accepts, the salesman receives a financial bonus for convincing the buyer to accept the higher interest rate.
Luckily, you can prevent this from happening. If you are buying a car, or a mobile home, or obtaining home repair services, ARRANGE YOUR OWN FINANCING. The most effective way to do this is to explore financing ahead of time. Go to several reputable lending institutions and find out what you can afford and what interest rate they can offer you. Go into the dealership and tell them you don’t wish to discuss financing until you settle on a price. After you have a price that satisfies you, explain that you already have your own financing.
If you follow this strategy, it is also less likely that you will be a victim of a high-pressure sale.
Do You Need Life Insurance?
The basic question to ask yourself about life insurance is whether you need it at all. Consider the reasons why you bought the policy in the first place, and then question whether you still need it. Do you want your income increased now, or do you want more money to go to your beneficiaries when you die? If you have a modest income and you are spending a significant portion of it to maintain your life insurance, consider dropping it.
Be Careful! Don’t allow an agent to scare you into purchasing insurance immediately without a chance to think it over. If you decide to drop your insurance, don’t allow an agent to scare you into keeping it. Never pay cash or make a check out to an agent. Checks should be made out to the insurance company. If you have several policies, pay the premiums on them separately, rather than in one lump sum. Otherwise, the insurance company may not apply your money toward the appropriate premium. Beware of agents who say they are affiliated with the government or Medicare. Insurance is confusing. Ask a lot of questions. If you can’t seem to get the answers, you should be worried!
Types Of Policies
- “Term Insurance:” This type of policy covers you for a specified number of years, during which you pay premiums. If you die during that period, your beneficiary collects the face value of the policy. Generally, term policies are renewable up to a certain age, such as age 65, but after that they are often too expensive to maintain.
2. “Whole Life:” This type of policy covers you for your lifetime, as long as you keep paying premiums. It will also accumulate “cash value,” a kind of savings reserve that you can borrow from while you’re still alive. Such borrowing, however, will reduce the value of your policy.
Signs Of Financial Abuse
While a lot of people are very nice and only want to help others, some people will abuse friendship by stealing from the people they are supposed to be helping. Stop and look at your situation, and that of your friends and family.If you see signs of financial abuse, you can contact Community Legal Aid, Adult Protective Services, the Attorney General’s Office, or the police for help.
- Do you manage your own money and property?
- Can anyone else withdraw money from your bank account?
- Have you noticed money missing from your bank account?
- Are checks missing from your checkbook?
- Can you obtain cash when you need it?
- Has anyone had you sign something you don’t understand?
- Are belongings missing from your home?
- Has anyone asked you to add them to your deed?
- If you have a power of attorney, does your agent do things you don’t want?
- Does your paid caregiver make you pay extra for services?
On January 28, 2000 the Delaware Telemarketing Fraud Act was signed into law. Among other things, the law provides that most people and businesses who sell things over the phone must first register with the Consumer Protection Unit of the Department of Justice. The new law provides that if someone calls you on the telephone and sells you something, you may be entitled to cancel your purchase. In most cases the sale will only be considered final seven business days after you receive a written notice of your right to cancel. This notice must contain specific language. In part, the notice must say:
You, the purchaser, may cancel this transaction without any penalty or obligation at any time prior to midnight of the seventh business day after receipt of this notice. If you cancel, any payments made by you under the sale will be returned within ten business days following receipt by the seller of your written notice of cancellation…”
In order to cancel a transaction, you must mail or deliver written notice to the seller at the address given in the notice. If you try to cancel the purchase over the phone, you will likely be unsuccessful.
The new law further provides that if you tell a telemarketer, either over the phone or in writing, that you do not wish to be contacted by them anymore, they are forbidden to call you again for at least 10 years.
Telephone “Slamming”The competition between long-distance telephone service providers is fierce. You have probably received mailings and/or calls from sales representatives telling you why you should switch long-distance carriers. Some providers may try to entice you with a special incentive, such as free calling or a rebate. Occasionally a provider may switch your long-distance carrier, or the types of services you receive, without your permission. This is known as “slamming.” Slamming is against the law.If someone calls you on the phone and asks you to switch carriers, it is best to request something in writing. If you receive written materials, which may even include a check you can cash, always read the fine print — including the print on the back of the check. Make sure you are not signing up for services you do not wish to receive.If you discover that your long-distance provider has been switched without your permission, contact your local phone company and ask to be reconnected to your preferred provider. Explain that you did not order the disputed service and that any charge for switching companies should be taken off your bill. Next call your preferred long-distance provider and report the illegal switch. Ask to be reconnected to your preferred provider for free.You should also call the long distance phone company that tricked you and tell them that all of their charges within 30 days of the switch should be removed, and all of the calls after that should be recalculated based on your preferred provider’s billing rates. (If you have already paid your bill, the company that slammed you must forward your payments to your preferred provider. You should get a refund of any amounts over what you would have paid your preferred provider.)Slamming problems may be reported to the Federal Communications Commission (FCC) (1-800-CALL-FCC). To verify your phone provider, you may call 1-700-555-4141 (and 1-302-700-4141 to verify your provider for local toll services).
Time Shares And Campground Resorts
If an offer to purchase a time share or campground resort package in a warm place sounds good to you right now, think again. You may be solicited to make such a purchase, only to later find out that your “investment” is virtually worthless.
Delaware has laws to protect consumers from unscrupulous solicitations for time share and campground resort purchases. The law applies to these types of contracts if they are signed in Delaware, even if the property is located elsewhere. The most important thing to remember is that if you make such a purchase you have 5 business days from the signing of the contract in which you may cancel the contract. The cancellation will only be effective if you put it in writing and send it by certified mail to the address listed in the contract. If you do this, you have the right to receive, within 15 days, a full refund of any money you paid.
You may be told that if you visit the time share property you will receive a “gift” or something of value. It is unlawful for someone to offer you this unless they give you certain information in writing. This information includes, among other things, the address of the time share plan or campground resort, the retail value of the item they promise to give you if you visit, and any restrictions or qualifications that must be satisfied before receiving your “gift.”
Some entities have become aware of these laws and have already developed ways to get around them; for example, by making sure their package does not fit within the definitions of “time share” or “campground resort.” If you are considering purchasing a vacation package, you should feel free to ask a lot of questions and even retain a lawyer to review the contract. Do not feel pressured to make a hasty decision you may later regret.
At year-end it is not unusual to receive telephone calls asking you to give money to a charity or fraternal order of some kind. You have the right to say no, and you do not have to remain on the phone. If you are considering giving money, make sure you ask a lot of questions first. You should feel free to ask the solicitor to send you the donation request in writing. Delaware has a law to safeguard the public against fraudulent and misleading charitable/fraternal solicitations.The law states that charitable/fraternal solicitations may not take place after 9:00 p.m. or before 8:00 a.m.The law further provides that the caller who is asking you for money must:
- Identify himself by name before soliciting you;
- Identify himself as a professional solicitor (i.e., as someone being paid to call and ask you for money), if that is the case;
- Identify the organization for whom the caller is requesting money;
- Upon request, reveal how much of your donation will go to the charity.
The caller is not allowed to use the term “police,” “law enforcement,” “trooper,” “rescue squad,” “firemen,” or “firefighter” unless the caller is employed by a bona fide police, law enforcement, rescue squad or fire department, or such entity has authorized the use of these terms.
Tips From the Office of the Attorney General
Several short pamphlets concerning ways to avoid becoming a victim of fraudulent criminal acts.
Better Business Bureau – Wilmington Office
Better Business Bureaus: provide reports on business firms that will be helpful to you before making a purchase; provide information about charity groups and organizations; help resolve consumers’ disputes with businesses through telephone conciliation, mediation and arbitration; and promote ethical business standards and voluntary self-regulation of business practices.
Website that provides links to state and federal consumer agencies as well as consumer advocacy groups.
National Association of Consumer Advocates
NACA’s mission is to promote justice for all consumers by maintaining a forum for communication, networking, and information sharing among consumer advocates across the country and by serving as a voice for its members and consumers in the ongoing struggle to curb unfair and abusive business practices that adversely affect consumers. From its inception, NACA has focused on issues that involve predatory, fraudulent, or deceptive business practices affecting consumers.
National Consumer’s Union (Consumer Reports)
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only consumers. It is a comprehensive source for unbiased advice about products and services, personal finance, health and nutrition, and other consumer concerns. Since 1936, its mission has been to test products, inform the public, and protect consumers.
A “one-stop” link to a broad range of federal information resources available online. It is designed so that you can locate information by category — such as Food, Health, Product Safety, Your Money, and Transportation. Each category has subcategories to direct you to areas within individual federal web sites containing related information.