How one home warranty scam drove a Detroit woman to tears

After years of renting, Vickie Powell bought her first home about three years ago in Detroit. She loves her home and wanted to do what she could to protect herself from unexpected, budget-busting home repairs.

So, when she got a letter warning her about a "potential lapse of warranty coverage" — and the letter claimed to be from Southwest Housing Solutions, a community-based nonprofit that helped her — she called the number.

She talked with a woman, who suggested that she pay $189 a month for coverage, but Powell knew she really couldn't afford a bill that big. Instead, she agreed to coverage for $129 a month, again, fearing that she'd need a warranty if a water heater or furnace should break or she'd face other costly repairs ahead.

"I gave them all my information because I thought I was doing the right thing," said Powell, 63, who lives on a limited income. She handed over her debit card number and the last four digits of her Social Security number.

Then, she called her contact at Southwest Solutions. Her contact told her the letter wasn't from that group and advised her to immediately cancel the coverage. Then she saw that $129 went out of her debit-card account to buy something on Amazon. She knew for sure that she had been scammed.

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"It was $129, baby," she told me. Now no longer able to work, she isn't out there buying new clothes for herself, she said, so she certainly didn't want to buy them for someone else.

She never saw that money again — even after she asked for a refund and was told she'd get one.

The whole experience drove her to tears. At one point, her son had to get on the phone when a man became belligerent with her as she tried to get her money back. "He cussed the man out. 'You don't be talking to my momma like that. You all owe her some money. You should give it to her,'" she recalled her son saying.

The response back, she said, was: "We don't owe your momma nothing."

She canceled the debit card to prevent more money from being taken out. She's tossing other letters that mention home warranties in the trash. A pink one just arrived the other day. And she's doing her best to not talk to scammers.

"It is a mess. Please be careful," she warns others.

"I'm kind of scared to even answer the phone. They're really trying to get to me," she said of the scammers.

Another caller falsely claimed to be from the Detroit police with a warrant for her arrest. It's yet another scam. Think about it. Why would the sheriff or police warn you in advance of an arrest warrant? If there's a warrant, the police aren't calling you on the phone to give you more time to start running.

How to spot a home warranty scam

Home warranty scams — which can start out impersonating real companies or lenders — often end up hurting the most vulnerable consumers, the people who don't have much money to start.

The letter arrives out of the blue, says you need to renew your home warranty now and suggests that your home could be at risk, if you don't call soon. Mortgage companies are not mailing out such notices.

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A homeowner in Wayne told the Better Business Bureau that she received one of these letters last September telling her that she needed to update her home warranty, which was about to expire. She called the number on the letter and ended up giving them her debit card information — and she lost $195, according to Kelly Johnston, public relations and marketing manager for the Better Business Bureau Serving Eastern Michigan.

Mind you, you might not even have a home warranty that is about to expire. But someone is going to try to trick you into thinking that you do to scam you out of big bucks anyway.

Michigan consumers who filed complaints with the state Attorney General’s Office this year say the home warranty notices they received often express a sense of urgency to renew, implying that the consumer has a relationship with the company when they don’t, according to Danny Wimmer, press secretary for the AG’s office.

Some complaints, he said, stated that consumers received letters with urgent wording like “final notice” or “final renewal notice.”

Some letters had county deed records listed on them to seem official.

If you don't act immediately, the letter emphasizes that you'll face a potential liability to cover repairs or possibly have trouble with your mortgage. But those kind of high-pressure tactics are a huge red flag when it comes to a scam. Best bet: Do not call the number on one of those letters.

Authorities have warned that the letters might look like official documents. But many could be sent by criminals outside the United States, to collect your credit card or bank account information.

"You won't be dealing with your mortgage lender if you call the number and 'renew' your warranty," according to a recent alert by the Better Business Bureau.

Why does the letter seem so believable?

Alex Makohn, senior manager for homeownership assistance programs at Southwest Economic Solutions, said the home warranty pitches seemed to have picked up in the past year or so.

"I get letters to my house once every month or so," she said. "They look pretty legit."

Often, the letters tap into public records to be able to list information on your loan and lender. They may even list the date when you bought the house. Other scams, including those involving foreclosure scams, can use public data to make their pitches seem legitimate, too.

Makohn recommends working with a nonprofit housing counselor first if you're confused by such pitches that arrive out of the blue. Southwest Economic Solutions also provides first-time homebuyer education and post-purchase education.

Many of us are aware of some of the sketchy sales tactics that have been used to sell car warranties over the years, including seemingly never-ending robocalls. Some of those fraudsters pretend to represent the auto manufacturer or car dealer. But they have no connection to the dealer.

Many times, as I reported in a column last August, consumers don't know they've been scammed until very little or even nothing is covered when the car breaks down. What you're buying might not even be worth it. Same can be true with these "home warranty" scams.

Sometimes, they're simply stealing your money. Or they're offering very limited, essentially useless coverage.

What can you do to avoid losing money?

If you're confused, the best bet is to reach out directly to your lender. The BBB suggests that you look up contact information on your mortgage bill.

Take time to read the fine print, too. Some solicitations give the impression that they're official but at the very bottom will note: "Not all consumers had previous coverage. We are not affiliated with your current mortgage holder."

Some letters appear to include a check but note at the bottom: "This is not a check."

Always type the name of the company marketing a warranty into a search engine and search the words "complaint" or "fraud."

A key tip from the Federal Trade Commission: "Some warranties make you pay for labor or to ship the product back for repairs, which could be expensive for heavy items."

What's covered under any warranty should be spelled out in a written policy. Scammers can be intentionally vague in what's covered and what's not."The product may be real," according to the BBB alert, "but you truly need something else."

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor.

This article originally appeared on Detroit Free Press: Why home warranty letters look legitimate but aren't