State Agencies Warn Tornado Victims About 'Deductible Scam'
NORTH TEXAS (CBSDFW.COM) - Two state agencies are warning North Texans about a new company targeting victims of the recent tornadoes.
The company appeared to shut down just hours after the Texas Department of Insurance and the Texas Attorney General accused the business of "sparking fear" in homeowners.
The company, Prepaid Home Deductible, offered to pay deductibles for customers who sign up to make small monthly payments, as long as the customer hires a contractor from PHD's preferred vendor list.
Its own website described the program as an "elegant solution for storm deductibles and contractor selection."
While the company opened earlier this year, it started getting attention this week after handing out flyers in tornado-ravaged neighborhoods.
The top of the paper read: "If you do not pay your insurance deductible - go to jail," which is a misleading reference to a new state law that went into effect September 1.
The law makes it illegal for contractors or roofers to waive a deductible. Contractors or roofers who do so can be charged with a misdemeanor.
The flyer also included the logo for the Texas Department of Insurance, which did not sit well with the agency.
Today the TDI called the company a "deductible scam."
"Intentionally scaring and misleading people who are trying to recover from a devastating storm is unconscionable," said Insurance Commissioner Kent Sullivan. "Homeowners were already required to pay the deductible. The new law helps protect them from bad contractors."
The Texas Attorney General's Office later released a statement saying it had issued a cease-and-desist letter to PHD.
"These practices, according to the letter, if proven true, violate the Deceptive Trade Practices Act," Attorney General Ken Paxton stated in the press release.
The owner of PHD, Dan Armando, spoke to the Ones for Justice Thursday morning.
Armando first claimed his company was legitimate, but did acknowledge the product was confusing to consumers.
He said he had agreed to stop distributing flyers after hearing complaints. But by Thursday afternoon, it appeared Armando had shut down the business entirely.
A tweet from PHD's Twitter stated the business model was "not viable in Texas."
"Good luck, Texas," the message read. The account was deactivated soon after.
PHD's website disappeared Thursday, along with the company's social media accounts.
Steven Badger is a Dallas attorney with Zelle LLP. He helped write the initial proposed draft of HB2102, then advocated for its passage.
Badger offers these three tips for North Texans who are rebuilding after a storm:
1. Consider buying a homeowners insurance policy with a lower deductible -- Talk to your agent. These policies are available. For a few dollars more a month you can avoid having to pay a large 1% or 2% deductible when the inevitable hailstorm hits.
2. Ask your contractor for a referral to a deductible financing company -- There are legitimate financing companies which will pay your deductible in full and allow you to make payments over time. Just like any loan. This is permitted under HB2102.
3. Stay away from any contractor who purports to have found a "loophole" to waive your deductible. There are no loopholes. The law is clear. Such contractors will likely implicate you in an insurance fraud scheme to get around the new legislation.
