Bamboozled: December 3, 2015

checkNearly two months ago, we brought you the case of Sayreville, a warranty company and some funds that were missing in action.

We now know the fate of those funds.

But first, step back in time and follow the money trail with us.

Our initial story came about when a Sayreville resident’s 89-year-old mother received a solicitation for a water line warranty.

Sayreville’s water department logo was on the envelope and also on the inside letter.

It said: “The water service line buried underground on your property could fail without warning, leaving you responsible for the cost of repair. Repair or replacement of this line can be expensive — costing you thousands of dollars in unforeseen expenses — which could burden finances.”

Then came a pitch for warranty coverage that would take care of such repairs if they were ever needed.

The woman who received the letter believed it came from the borough because it used the water department logo, but that wasn’t so.

The bottom of the letter revealed it was an offer from a third-party company called HomeServe.

Sayerville signed a contract with HomeServe, selling the rights that would allow HomeServe to use the logo on its mailings. The borough also agreed to give the company private contact information for its residents.

In exchange, the borough would get a 10 percent cut of the warranty sales.

Bamboozled revealed something Sayreville didn’t know when it signed the contract. HomeServe had gotten in trouble in the past for similar warranty offers that appeared to have come from municipalities.

Maryland, for one, said the company solicited customers “by falsely implying the businesses were acting on behalf of municipal governments.”

HomeServe settled the allegations with Maryland, and also Ohio, Kentucky and Massachusetts, without admitting wrongdoing.

Sayreville said it didn’t know about the company’s past when it signed the deal.

Now, the money.

Bamboozled also learned the borough had not collected a penny of its 10 percent cut from HomeServe on its warranty sales, which at the time were estimated to be worth more than $27,000 at the end of September, according to data provided by HomeServe to Bamboozled.

When we asked where the money was, borough officials didn’t answer the question.
So after that first story ran, we submitted an Open Public Records Act (OPRA) request about the funds, and we asked for copies of all Sayreville’s correspondence with HomeServe.

We got back hundreds of pages of documents.

Not only did we see the communication between the borough and the company about what information should be shared with Bamboozled, there were questions to business administrator Dan Frankel about when he was going to answer questions about what was happening with the money due to the borough.

If he answered those questions, it wasn’t done in an email.

In the weeks after the first time Bamboozled reached out to borough officials, there were dozens of emails between HomeServe and the borough, the OPRA request showed.

In that same time frame, HomeServe sent emails in which it offered options for the money owed to the borough. Sayreville could be paid the funds, it could instruct HomeServe to donate the funds to a charity, or it could earmark the money for a “hardship” fund to help qualifying residents who don’t have coverage to receive emergency repairs.

We also deduced that some conversations on the topic were done by phone, so there were no email records detailing what would happen to that money.

So we turned to the borough council’s meeting minutes, but there was no record of discussions about the warranty money.

GETTING ANSWERS

We went back to business administrator Frankel and Councilman Art Rittenhouse to see the status of the funds.

Frankel responded via email, saying the amount was between $24,000 and $25,000.

“Mayor and Council have decided not to have a hardship program,” he wrote. “Instead, Mayor and Council has asked HomeServe to rebate the money collected.”

We asked what “rebate” meant, but he said he was in meetings and didn’t respond in time for publication.

Frankel also didn’t answer a question about an Oct. 26 email in which HomeServe suggested keeping the “brand” on the envelopes. We wanted to know if the borough was still allowing HomeServe to use its logos.

We were especially interested because Frankel told Scott Kohlhepp — the man whose mom received the initial pitch — that he would ask HomeServe to stop using the logo on the envelope mailings.

We’re not sure if that ever happened.

Then we caught up with Rittenhouse, the councilman, and he shed a lot of light.

“We felt it would be better to offer a refund to everybody who bought warranties,” Rittenhouse said. “All of that money that would normally have gone back to the borough will go to each person, a refund equivalent to 10 percent of their bill.”

Rittenhouse said HomeServe is right now working on a way to process those refunds.

He said the borough decided against using the funds for a hardship program because it would be too difficult to determine who should qualify.

“We felt it would be a better situation to just return the money right to the consumer,” he said.

What about the logo use?

Rittenhouse said for now, HomeServe will probably continue using the logo. That’s because the borough wants to make sure consumers know HomeServe’s warranty program has been vetted by the borough, while those from other companies have not.

“Unless we can come up with something better to do — I don’t want to say it’s the lesser of two evils but it’s probably the most efficient way. And we will let people know they don’t have to buy it,” Rittenhouse said.

He said the borough is working with HomeServe to change the wording on the letter to make it more clear for residents.

HomeServe will be sending a revised draft to Frankel, Rittenhouse said, who will then share it with the mayor and the council for approval.

Rittenhouse also noted that he’s spoken to 10 residents who purchased the warranties and needed to make a claim, and he said they were all happy with the service they received.

We’re very glad that Sayreville is taking steps to be more transparent with its residents about this offer.

If you purchased one of the warranties, let us know when you receive your 10 percent check.

Have you been Bamboozled? Reach Karin Price Mueller at Bamboozled@NJAdvanceMedia.com. Follow her on Twitter @KPMueller. Find Bamboozled on Facebook. Mueller is also the founder of NJMoneyHelp.com. Stay informed and sign up for NJMoneyHelp.com’s weekly e-newsletter.