Price gouging rules in effect for counties declared disaster areas
DES MOINES – Iowans in northeast Iowa impacted by recent flood damage should be wary of consumer scams and shady contractors who tend to solicit victims of natural disasters.
Consumers should be watchful for clean-up, home repair and construction contractors, especially those who seek business door-to-door and ask for advance payment.
State regulations make price gouging illegal for those counties where a disaster declaration is in effect. Price gouging is defined in the Attorney General's Administrative Rule as raising prices unreasonably above the price at which the merchandise or service was sold in the usual course of business immediately prior to the onset of the emergency. The rule, which applies during the emergency declaration and "subsequent recovery period" up to six months, recognizes that prices may be higher because sellers also often incur increased costs.
Consumer Tips for Flood Victims
- Check out the contractor before you sign a contract or pay any money. Ask if the contractor is registered with the Iowa Workforce Development's Division of Labor Services. You can check a contractor's registration online through the Division of Labor Services website, or call 1-800-562-4692 or 515-242-5871). Be sure to check local references. Also, check Iowa Courts Online for past court cases, and see if there are complaints on file with the Better Business Bureau and the Attorney General's Consumer Protection Division.
- Get it in writing. Seek several written estimates for the job you want done. Before any work begins, agree on a written contract detailing work to be done, responsibility for permits, costs, and any other promises. Request a copy of the contractor's liability insurance certificate. Put start and completion dates in writing and consequences if the contractor fails to follow them (For example: The contract could be nullified if the contractor doesn't start on time.).
- Avoid paying large sums in advance to a contractor. If you have to make a partial advance payment for materials, make your check out to the supplier and the contractor. Insist on a "mechanic's lien waiver" in case the contractor fails to pay others for materials or labor.
- In most cases, Iowa's Door-to-Door Sales law gives you three business days to cancel a contract signed at your home.
Advice for Contractors
- A consumer contract must contain all of the material terms, and be fully disclosed to the consumer before the consumer signs the contract – and the contractor must leave a complete copy with the consumer after it is signed.
- While a contractor can advise a consumer on what work and materials are needed to repair storm damage, the consumer must be the person to negotiate the insurance claim with the insurance adjustor or the company.
- If the Iowa Door-to-Door Sales Act applies to the sale, the seller must use the proper language and format required in Iowa, and provide the proper Iowa cancellation forms at the time of sale. (Use of any other form could result in the voiding of the contract as well as civil penalties.)
- A seller cannot include provisions in a contract that materially misrepresent the legal rights of either party, even if the seller has no intention of enforcing the misrepresentations.
- A person collecting on a consumer debt cannot threaten to take action that the collector has no intention of taking.
- If the contractor intends to enforce the document as a contract, the document must clearly and conspicuously disclose that it is a binding contract before the consumer signs it.
- State law prohibits price gouging when a county has been declared a disaster area.
Consumers should contact the Consumer Protection Division if they have consumer complaints about questionable contractors or about price-gouging: