I-Team: Lowe's New Home Improvement Deposit Policy Gives Customers Little Leverage

BOSTON (CBS) - The WBZ-TV I-Team recently uncovered that Lowe's was requiring customers in Massachusetts to pay in full for home improvement jobs before the work ever began. That's against state law. Lowe's quickly agreed to change those contracts but the story doesn't end there.

Marybeth Ducharme recently hired Lowe's for a $30,000 kitchen make-over. Ducharme paid in full, then she saw the I-Team report and went right back to Lowe's.

"And he explained to me that I did only have to pay a 1/3 when I signed the contract. But the 2/3 was due before anyone would even come into my house to do anything," said Ducharme as she explained her conversation with a store manager.

Lowe's agreed to return 2/3 of the total payment. But under the new contract, customers need to pay that money right back on the first day of construction. All of the money except for $100.

"I'm not sure it really is a fix. I still think the consumer is vulnerable," Ducharme said.

In a statement Lowe's told WBZ,  "We stand behind our products and services, and our contracts are compliant with the law. We also offer customers a 1-year labor guarantee to provide additional peace of mind and trust that Lowe's will support their project from start to finish."

Massachusetts law states contractors can only require a deposit of one-third the total contract price before work begins. Typically, contractors then set up an installment plan for payments throughout the entire project.

In September, we asked Consumer Affairs Undersecretary John Chapman, what's so dangerous about giving all the money upfront?

"I think what's dangerous is that a contractor can walk off the job, he can do shoddy work, there's no sort of incentive for them to do things correctly," he said.

When we brought the illegal Lowe's contract to the attention of Consumer Affairs, they reached out to Lowe's and told them it needed to be changed.

So, what does the state office have to say about this new contract?

Consumer Affairs tells us it's legal and in a statement said, "Consumer choice is a valuable tool and we encourage consumers who are not satisfied with the terms of their home improvement contract to feel empowered to conduct their own research and make decisions that work best for them. Consumers should remember to always use a registered contractor for any home improvement job and to file a complaint with our Office when they believe their contractor has violated the law."

North Shore attorney Marsha Kazarosian said she wouldn't sign this new contract.

Kazarosian believes paying nearly all the money on day one of a project still gives customers little leverage if something goes wrong. That was the case for many Lowe's customers WBZ spoke with who all dealt with long delays, multiple contractors, and work that had to be repaired.

"The reason that law is in place is to protect customers from this sort of thing," said Kazarosian.

She also sees a big problem with another requirement in Lowe's contract. At the same time customers put down the initial 1/3 deposit they are also required to authorize that future 2/3 payment via check or credit card. Lowe's will then automatically cash the check or charge the credit card on the first day of the job.

For comparison, we asked Lowe's main competitor how they do business.

Home Depot requests a deposit of 1/3 and then sets up a payment plan. In some cases, Home Depot won't ask for the rest of the money until the whole project is done.

Contractors are allowed to request more than 1/3 for a deposit if the job includes a custom or special order. But because of our story on Lowe's, Home Depot tells us they are adjusting even those contracts, so that all of their programs will only require a deposit of a third.

If there's something you think the I-Team should investigate send an email to ITeam@cbsboston.com or call 617-779-TIPS.