Return to Transcripts main page

Open House

Ripped Off: Dealing With Contractors, Insurers; Mortgage Meltdown; Perfecting the Art Form of Complaining

Aired February 24, 2007 - 09:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

GERRI WILLIS, HOST: Good morning, everybody. This is OPEN HOUSE, the show that saves you money.
Customer service is so important to all of us. It's frustrating to wait on hold for 20 minutes, to be stuck in an airport for hours with no end in sight, or to be charged bank fees that you know are unreasonable. Bottom line, you feel ripped off, and we're going to spend the next 30 minutes giving you the solutions you need.

First off, we're talking about contractors, more specifically what you should do when the job isn't done on time. You can fight back. You can win.

Here to help is Joe Ridout. He's with Consumer Action in San Francisco.

Joe, welcome. Good to see you.

Thanks for having me on. Good morning.

WILLIS: All right. So let's get down to this.

You know, I'm always telling people, if you hire a contractor, get a contract. Don't put all your money down at one time. A little bit at a time, just 10 to 25 percent when you start out. And then as each major section gets done, you pay a little bit more.

That's right.

JOE RIDOUT, CONSUMER ACTION: That's an excellent idea. And planning very carefully about what you're wanting from the job and putting everything in writing that you expect the contractor to do for you can go a long way toward avoiding these kinds of problems in the future.

WILLIS: Now, the thing that you say that I think is so great -- because I don't think people know this -- is that you can actually fight. There is a way to fight if you've got a contractor who's a problem.

RIDOUT: Absolutely. Most states have contractor state license boards which offer mediation or arbitration services in the event there's a dispute between you and the contractor. And what's more, even if the state license board can't help you, you still have recourse to small claims court, which is usually enough to resolve what's -- what's in dispute. The state -- small claims limits are greatly different. It can be anywhere from $3,000 to $15,000. But that's going to accommodate a lot of the home improvement disputes.

WILLIS: You know, you say go to small claims court, which I think is a great idea. A lot of people think, oh, I've got to hire an attorney. It's going to take me forever. But not the case here.

RIDOUT: Oh, no. Small claims court is a very simple procedure. It's just a nominal filing fee, usually around $30.

You get to go before a judge and explain for several minutes exactly what happened and why you're in the right. The contractor gets to do the same thing. And then at a later date the judge makes a determination who's in the right.

Now, collecting a judgment if you win can be a different procedure that can be complicated as well, but, again, your state license board can often help you collect those judgments in case you win. But small claims court is a lot more simple than people think.

WILLIS: All right. Let's switch gears. Let's talk homeowners insurance.

How many people have had a claim denied? What's step number one?

RIDOUT: Well, step number one is to speak with the adjuster again, be persistent, ask for a supervisor. And, you know, present your case, you know, in a different way perhaps by giving them more information. You can also solicit a different estimate for what it will cost to repair your home and submit that as additional material for them to work with.

WILLIS: You say look for an appraisal clause. What's that?

RIDOUT: An appraisal clause is something offered by almost all the major insurers, and it gives you an extra avenue to resolve complaints when there's a dispute over your claim. An appraisal clause allows you to hire an independent appraiser, and the insurance company gets to do the same thing. And then an independent referee decides, based on these two independent appraisals, whether the claim should be accepted or denied. But that's one other very useful thing for consumers who are frustrated with the claim denial, the appraisal clause.

WILLIS: Right. Of course, you know, so many people don't have enough insurance to begin with, but that's a whole other story and one I'm sure we'll get to.

Let's go to credit cards. So many people out there frustrated with the late fees, which are now $30, maybe more. And they're now being charged penalty interest rates if they make a late payment. You could see a rate of 30 percent or even more on your credit card, which is crazy.

What's the best thing to do if you want to get those fees rolled back?

RIDOUT: If it's the first time you've been late in a year, simply contacting your credit card company and asking them to remove the late fee really will often be successful. Really, complaining and communicating with your credit card company can get them to reduce a late fee, to reduce an interest rate. It was estimated by one study that about 60 percent of consumers who contacted their credit company asking for a rate reduction in their APR received one. So they often will do something for you.

WILLIS: I've done that. That's an easy thing to do. That's a great thing to do.

RIDOUT: It is. Yes.

In the event that you're very frustrated with your credit companies -- because really, like you say, late fees now run about $39 for the larger credit card issuers, and penalty interest rates are around 32, 33 percent in many cases -- you have to be prepared to take your business elsewhere once your credit card company begins to show its fangs.

WILLIS: All right. Well, Joe Ridout, thank you so much for helping us out today. Really appreciate your information.

Coming up on OPEN HOUSE, ripped off. What the powers that be in Washington are doing about predatory lending.

And everything you've always wanted to know about complaining the right way to get what you want.

But first, your "Tip of the Day."

(BEGIN VIDEOTAPE)

WILLIS (voice over): We all get too many credit card offers in the mail, but what if these solicitations could actually do some good, like lower your interest rates? The average standard fixed rate is now 13.36 percent. If your rate is higher, now is the time to pull out those solicitations. It's time to negotiate.

Call your current credit card company with one of those low-rate offers handy. Say you want them to match or beat the offer or you just might switch. Once you secure that lower rate, keep it low by paying at least the minimum on time every single month.

That's your "Tip of the Day."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: One of the biggest ripoffs these days comes courtesy of predatory lenders. Now, these are lenders who don't have your best interests in mind when you take out a mortgage. The result, mortgage defaults across the country, to the tune of $164 billion. (BEGIN VIDEOTAPE)

WILLIS (voice over): If you stretched your budget to buy that dream house in the last few years, you could be struggling right now. Experts say the creative financing that allowed many people to buy a home is coming back to bite them.

Foreclosures are soaring, up 42 percent last year. And by one estimate, more than two million families will lose their homes in the next few years as they fall behind on payments. The culprit many say is simply not understanding the terms of their loans.

For the first time, some homeowners are facing the fact that the super-low interest rates they paid initially are going up, way up. Those bargain basement teaser rates are giving way to higher rates that could double a homeowner's monthly mortgage payment.

Some in Washington are looking for solutions. One possibility, making loan officers responsible for putting consumers in the right mortgage. Another, tightening regulations on mortgage brokers, who now account for half the mortgage business in the U.S.

(END VIDEOTAPE)

WILLIS: Congressman Barney Frank is the chair of the House Financial Services Committee. I sat down with him recently to find out what Washington is doing to protect homeowners.

(BEGIN VIDEOTAPE)

WILLIS: We've been talking on our show for quite some time now about what we call mortgage meltdown. And as you know -- I know you know these numbers -- there were over a million foreclosures last year. There are expected to be more foreclosures this year, in fact. And what we see is that the expectations that one in five subprime mortgages are going to go belly up.

What are you going to do about this problem?

REP. BARNEY FRANK (D), MASSACHUSETTS: You gave a very good statistic there -- 20 percent of the mortgages are failing. Well, 80 percent are not. And our job is not to do away with all failures, frankly, because then you would not get the loans that are being paid. But it should be to reduce the failure rate into the low single numbers instead of, you know, 20 percent.

WILLIS: Why are the feds so far behind? Why is it taking Congress so long to act?

FRANK: Because until January the Republicans were in control. The Democrats wanted to change it.

You asked me why is it taking so long. Because we have been in power since January. And I hope we will pass the predatory lending bill this year. That's one of the differences it makes of the Democrats, versus the Republicans who are in power. WILLIS: Will you introduce it?

FRANK: Yes, we are working on it now. We introduced one last year. Congressman -- two congressmen from North Carolina, Brad Miller and Mel Watt, are particularly concerned. They've worked closely with the Senate for responsible lending. They worked -- they know a lot about that law. And you break suitability down.

There are two principles that I think are very important. First of all, it should be illegal to lend people more money than they can repay. Secondly, you should not lend people more money than the thing is worth that they are buying.

WILLIS: More than the house is worth.

FRANK: Yes.

WILLIS: But that's been a sliding scale, right? I mean, that's a number that's changed, obviously, over time.

FRANK: Well, it's changed, but we have now gotten to a point where people -- they call it the loan to value ratio. The loan is exceeding the value.

What that means is that as the interest rates go up and people's incomes don't go up, and the price of the house has not gone up, people are stuck, and that's where you get the foreclosures. So we will, I hope, pass a law that one will cover everybody in the business, brokers and bankers and your uncle and anybody who, you know, gives you this kind of binding advice. And two, it will have restrictions on the kind of loans that can be made.

One, you couldn't loan people more than they can reasonably expect to repay. And two, you can't lend more than the place is worth.

WILLIS: Well, and isn't that a big question, though? Are mortgage brokers really your advocate?

(END VIDEOTAPE)

T.J. HOLMES, CNN ANCHOR: And we want to bring you an update now on some -- really dangerous weather that's starting to take place. We've been talking about this kind of this morning, the potential for it. But it appears now that we're starting to see this stuff -- stuff pop up.

We're going to check in with our Reynolds Wolf standing by in the severe weather center. A wide area now under the gun kind of.

(WEATHER REPORT)

HOLMES: Right now, OPEN HOUSE is going to continue right after a quick break.

We'll see you soon. (COMMERCIAL BREAK)

WILLIS: OK. We all do it, on the phone, in person, and writing. It's complaining. But you may not always be complaing the right way to get what you want.

To help us perfect the art form of complaining is life coach, author, "O Magazine" contributor -- many accolades here -- Martha Beck from Phoenix, Arizona.

Martha, good to see you.

MARTHA BECK, LIFE COACH: Great to be here.

WILLIS: Now, OK, I just have to complain about complaining for a second. You know, when you're dealing with a big company and they have a system, a customer service line, an 800 number for you to complain on, it's more like a buffer. It seems more like a way of keeping you from getting what you want rather than helping you.

How do you get through that?

BECK: Well, you have to be persistent about looking for a real human, for one thing. Now they often have systems of computerized levels of complaining. You need to keep buzzing through until you actually get to a person.

WILLIS: Right.

BECK: And at that point you have to -- you have to make sure it's the person who's in enough control to be able to change the situation.

WILLIS: How do you know that? So many of these people are reading from scripts, you can tell.

BECK: Right. You ask.

WILLIS: Really? So, I just say...

BECK: It's that simple.

WILLIS: It's as simple as saying, what, "Can you fix this for me?" Or...

BECK: No. You say, "Exactly what is your level of expertise? Is there someone above you in the hierarchy who might be able to help me instead of just listening to the complaint?" And the person will be recorded usually for quality assurance. And if you ask to see someone up the chain a little bit, they kind of have to bump you up the chain.

WILLIS: I love that. OK.

You say state the problem clearly. Once you do, get to the person in charge. How do you do that?

BECK: Well, there are four steps to complaining effectively, and the first one is to know specifically exactly what's wrong. If you don't specify the problem, if you just say, "I'm not satisfied," you're really not giving them any information that's going to help them fix the situation.

WILLIS: All right. So, you know, I think a lot of people mess up that step, frankly. They don't have anything specific. They don't have days and dates of when things went wrong. You know, they kind of waffle when it gets to the real complaint.

What's the next step?

BECK: The next step -- so the first one is saying, OK, here is the problem, specifically. Second step, they need to know why it's bothering you. Because in order for them to come up with a solution, they have to know exactly the effect that it's having on you.

If they don't know, if you say to someone, "I just feel bad and I don't know why," they may try something to make you feel better that isn't targeted as your real experience. So you need to be really clear about, here's what's wrong and here's why it's bothering me.

WILLIS: And consequences. I mean, you have to tell people, look, if this doesn't get fixed, this is the end of our relationship right here, right?

BECK: Well, it could be the end of the relationship. It could be that you take some other action.

After you've explained the problem and why it's bothering you, you present a solution or a suggestion to help them figure out what to do. And then the fourth and final step is, you need to tell them what consequence will occur if the change doesn't take place. And it has to be something that will impact them negatively and something you're willing to actually do.

WILLIS: Like take your business elsewhere or something.

(END VIDEOTAPE)

REYNOLDS WOLF, CNN METEOROLOGIST: Hi, folks. I'm Reynolds Wolf in the CNN weather center, just giving you the very latest on our weather situation.

(WEATHER REPORT)

(COMMERCIAL BREAK)

WILLIS: All right. When you think about getting ripped off, mechanics may just come to mind. The problem is you can never be completely sure what should or should not be fixed and how much you should be charged.

That's why we sent CNN correspondent Greg Hunter to give you the lowdown on dealing with the repair shop.

(BEGIN VIDEOTAPE)

GREG HUNTER, CNN CORRESPONDENT (voice over): There are three top car scams you should always say no to.

Number one: Engine oil flushing.

MIKE ALLEN, SR. EDITOR, "AUTOMOTIVE POPULAR MECHANICS": The mechanic comes out and says, "Look at this dipstick, look how filthy your oil is. Your engine is all full of sludge. Just changing your oil isn't going to do it. What you need to do is to let me hook your car up to this machine which will run this special solvent through and it will pull all of the sludge out of your engine and your engine will last forever."

HUNTER: Say no to an engine flush. "Popular Mechanics'" Mike Allen says changing oil regularly is all you need to do.

Two: Fuel injector cleaning.

(on camera): When the mechanic asks you, "Would you like to have your injectors cleaned as regular maintenance?" do you need that?

UNIDENTIFIED MALE: Well, no. If your car is running fine, the check engine light is not on, it's not missing or getting poor fuel economy, you don't need to do that.

HUNTER (voice over): That fuel injector cleaning you probably don't need can cost around $150.

Three: Fuel-saving devices and additives.

The Environmental Protection Agency and Mike Allen have tested these products for years and say they don't work. Say no to any device or additive that promises better gas mileage.

UNIDENTIFIED MALE: Like any business, there are unscrupulous people who will try to take money away from you that they really don't deserve.

HUNTER (on camera): So the term that you're talking about is called what?

UNIDENTIFIED MALE: Service merchandising.

HUNTER (on camera): So remember, one sure way not to get ripped off with unnecessary service, just say no. Another, check your owner's manual. It will tell you exactly when to do it.

Greg Hunter, CNN, Clifton, New Jersey.

(END VIDEOTAPE)

WILLIS: And remember, just like you would with a doctor, a contractor, or any other service provider, you can always get a second opinion.

Now, when it comes to buying a car, getting a lemon is everybody's fear. A lemon is a new car that hasn't been street worthy for 30 days. Now, that doesn't mean it's been in the shop for 30 days, but a new car out of service for a total of 30 days or brought back for repair four times.

Now, the laws are different in each of the 50 states, so if you want details where you live, check out your state attorney general's Web site. And if you think you have a lemon, this is important. Write everything -- and I mean everything down -- the description of what's wrong with the car, mark the days the car is out of service on your calendar. You'll need a real record before you can actually make sure everybody understands you've got a lemon.

For background information, head to all alldatadiy.com. It has technical service reports that will tell you the kinds of things that typically go wrong with your make, model and year.

And when you're looking to buy a used car, check out carfacts.com. Now, that site will tell you whether the car has been in a major accident and is destined to become a lemon.

As always, we thank you for spending part of your Saturday with us.

OPEN HOUSE will be back next week right here on CNN. You can also catch us on "HEADLINE NEWS" every Saturday and Sunday at 5:30 p.m. Eastern Time.

Don't go anywhere. Your top stories are next in the CNN NEWSROOM.

Have a great weekend.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.voxant.com