Some sub-industries – e.g., used-car sales, timeshare sales, telemarketing, and auto repair – tend to connote marginal sales tactics, if not outright lying and swindling. The same can safely be said of segments within the broader home-improvement industry, particularly those with merchants who utilize door-to-door solicitation. Obviously, there are many forthright home-improvement merchants, as well as auto mechanics, telemarketers, and timeshare vendors. But there can be no reasonable doubt that such industries tend to provoke wariness amongst consumers and have been the inspiration, if not express subject, of a wide variety of state and federal consumer-protection laws.
This brief article examines a current trend in home-improvement-related predation upon consumer-borrowers: abuse of point-of-sale financing. Unsurprisingly, this trend is technology-enabled, though not essentially new – it’s mostly just a faster, device-oriented version of old-fashioned deceptions. Ultimately, the point is still to obtain more money at the expense of the buyer – i.e., to rip someone off. Point-of-sale financing is a rapidly growing consumer-credit market, with a number of creditors vying to make loans at the point of purchase (see, e.g., NerdWallet). Some of the larger point-of-sale lenders, such as Affirm and Klarna, will be familiar to those who make online purchases at a wide range of retail sites.
We focus here on point-of-sale financing within home improvement for a few reasons: such sales often occur at someone’s home, with a point-of-sale loan generated on the merchant’s mobile device (e.g., an iPad); are consistently the result of door-to-door solicitations, which have the inherent ability to catch people off-guard; tend to be relatively large in dollar value; and because Bell Law, LLC, has evaluated, and litigated, a number of cases in this regard so as to be able to speak with some insight and authority on this particular topic.
Point-of-Sale Financing by Home-Improvement Merchants: Taking Advantage of Lack of Expertise and Minimal Transparency
There’s nothing inherently deceptive about point-of-sale financing: it’s just a recent iteration of consumer lending, providing instant gratification in exchange for interest over the life of a repayment plan. It is the speed and relative opacity of such lending that makes it prone to abuse, especially when put in the hands of a contractor who wants to sell you as much as possible while getting paid as quickly as possible. If, for example, you want to purchase a pair of jeans online, you may be prompted, when checking out, to pay with your card or an installment loan from, say, Affirm. Regardless of how you choose to pay, it was you who proactively sought out the jeans and you do so from your laptop, phone, or tablet.
In contrast, say you’ve encountered the misfortune of a serious plumbing issue, with water leaking throughout your kitchen or bathroom. You can’t thoroughly research all the local plumbing firms; instead, you use a Google search and choose one with good reviews and an attractive website. You are, to a meaningful degree, captive: you are not a plumber; can’t have water running over your floor; and don’t have the time or frame of reference to thoroughly research the problem and how much it should reasonably cost to fix it. When the plumber you called shows up, they are carrying an iPad or other tablet. They have uploaded to that tablet an app, or apps, used by the business to obtain point-of-sale financing. Some creditors specializing in the home-improvement market include GreenSky (GreenSky), Fortiva (Fortiva), Service Finance Co. (Service Finance), and Acorn Finance (Acorn); there are many other such creditors, as well as related intermediaries.
So, the plumber diagnoses the problem and deems it an expensive fix: say, $12,000. You don’t have that much money and don’t want to charge it to your credit card. You end up with a point-of-sale loan, the funds for which will be paid directly to the plumber. That loan is obtained through the merchant’s tablet, which is difficult to see, if not completely concealed. The plumber, who knows next to nothing about consumer finance, chooses a loan plan for you. You may well be grateful for the point-of-sale loan given the circumstances but you still wind up with a $12,000 loan under distressed circumstances. Did you know that the “promotion” the plumber described actually expires after a year, leaving you with a much higher interest rate after twelve months? Did you know that the plumbing business only received $10,500 for the work even though you have to pay back $12,000 (i.e., you were charged the “merchant discount” of $1,500)? Did you know that the plumber actually submitted a credit application to two different finance companies and, even though both were approved, you didn’t get to see the competing offers?
Point-of-Sale Financing by Home-Improvement Merchants: An Increasingly Common Means of Elder Abuse
Next, take all the point-of-sale dynamics just described and imagine a door-to-door merchant attempting to hard-sell you something expensive that you neither want nor need. This could be, for example, a solar-energy system, pergola or gazebo, pest-control subscription, or triple-pane windows – products that may cost $30,000 or more. You want them to go away but aren’t an assertive person and they just keep talking over you. Imagine, further, that you’re seventy-five years old, have no interest in mobile devices, and have only obtained financing by personally signing paper loan documents with a pen. The aggressive salesperson asks you, for example, if you can afford a monthly payment of just two-hundred dollars and asks you to initial his iPad so that you can get some discount. You have no idea that, just by touching a nearly blank iPad screen with your finger, you – according to the salesperson – initiated a $25,000 loan to pay for the solar system you didn’t really want.
This, based on the experience of the attorneys at Bell Law, LLC, is an entirely realistic scenario. While the precise circumstances under which such scenarios play out may well differ, they tend to share some common threads:
- Elders are preyed upon in outsized proportion;
- The “transactions” happen quickly, often under distress;
- The consumer doesn’t fully understand that the merchant wants to generate a loan right then and there, often through their digital tablet;
- The consumer is expecting some sort of traditional loan paperwork or invoice, only to find out later that this was supposedly shown to them on the tablet;
- The consumer doesn’t even want financing;
- The “transactions” were the result of a door-to-door solicitation or time-sensitive circumstance, such as a termite infestation or plumbing leak;
- The merchant isn’t qualified to explain financing terms or options;
- The merchant conceals, if not overtly lies about, key aspects of the “transaction,” such as its true cost; and
- The financing company trained the merchant to “upsell” you.
This final point is an interesting one and entails a new dynamic enabled by the convergence of financing and selling. That is, rather than a borrower proactively going to a bank to apply for a loan in the traditional manner, point-of-sale creditors go with the merchants. It is the merchants themselves who generate loans and who are the customers of the creditors. Thus, these creditors want home-improvement contractors to sell you more (“upsell” you) for the sake of generating more and larger loans, and will sometimes train the merchants how to do so more effectively.
Point-of-Sale Financing by Home-Improvement Merchants: Prevention of and Possible Remedies for Deception
Perhaps the best advice for avoiding being the victim of a fraudulent home-improvement loan is to understand that such contracting often takes place digitally. This in addition to, in the case of an unwanted solicitation, simply saying “no.” It’s a good idea to not sign, or even touch, a merchant’s tablet unless you can see it clearly and understand that you may be signing an alleged contract. Don’t simply rely on the merchant’s version of what you’re seeing. While you may well still have a legal claim even if you do sign, or “sign,” a fraudulent digital contract, it’s probably easier if you simply don’t sign it at all unless you feel confident in what you’re signing.
Don’t let the merchant take advantage of your discomfort or impulsiveness. Aggressive salespeople, regardless of industry, thrive by pressuring people so that they sign a contract just to relieve that pressure. If you have a termite infestation or leaking toilet, you may feel compelled to sign anything just to have it fixed. But, similar to an auto mechanic holding your vehicle hostage for increasingly expensive repairs that you don’t understand, aggressive home-improvement contractors may take advantage of your compromised situation. If you do, for whatever reason, find yourself on the victim’s end of a fraudulent loan, regardless of the exact circumstances, you may consider the following remedial steps:
- Filing a complaint with the Consumer Financial Protection Bureau (CFPB Complaint);
- Filing negative online reviews (some merchants are, in particular, sensitive to Google reviews) and looking on social media for complaints against the same business;
- Filing a complaint with the consumer division of your state’s Attorney General’s office and the Better Business Bureau; and
- Assuming the fraudulent loan is reported to credit bureaus (most notably, Experian, Trans Union, and Equifax), filing a dispute with every bureau that’s reporting it.
If all else fails, you may consider contacting an attorney specializing in consumer protection, such as Bell Law, LLC, which has litigated a number of cases concerning fraudulent consumer loans.Please consider consulting us for a free consultation today: 816-886-8206 or https://bell-law-kc.com/contact/.