ABA Family Legal Guide

Home Ownership

Remodeling

Legal Protections

Which federal laws are applicable to remodeling projects?

Federal Trade Commission (FTC) rules address the problem of false advertising. It's illegal for a vendor to advertise any product or service for less than it really costs or to engage in the old bait-and-switch tactic. This happens when you are baited by an ad for a product or service, then told that it isn't available and switched to another, more-expensive version. The law requires vendors to offer a rain check whenever demand for an advertised bargain exceeds supply, unless the limited supply is clearly stated in the ad.

The federal Truth in Lending Act protects consumers who obtain financing for their projects. Whether you finance your home improvement through a bank, a credit union, or the contractor, the lender must prominently state the annual percentage rate (APR) of interest and the loan costs you will be charged.

Note that even if the terms appear reasonable, it can be a bad idea to have the contractor secure financing for your project, and in some areas it may also be illegal. Even though the contractor may approve you as a credit risk on what look like favorable terms, you'd be better off with a home equity loan from a bank or credit union. If you qualify for a loan from a bank, take it; if you don't qualify, then you should think carefully about whether you can really afford to remodel.

These laws help keep most contractors honest, but they can't keep the bad apples off the streets. Even if you report violations to the Federal Trade Commission in Washington or one of its ten regional offices, the FTC is not likely to prosecute a small contractor. Federal enforcement tends to concentrate on major violations or patterns.