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Water Filtration Scam Springs a Leak

February 2010

Help Now! Gets $100,000+ Settlement for nearly 40 Latino Families

Teo Perez was scammed into purchasing an unnecessary water filtration system. When he came to Help Now! we discovered almost 40 other Latino families were victims of similar scams.

A salesman appeared one day in August 2007 at Teo Perez's front door in Medford. The man worked for American Home Solutions of Roseville, Calif., and asked if he could test the safety of Perez's tap water.

The salesman added a few drops to the water, which then turned light yellow. He claimed that this meant the water was too highly chlorinated and thus unsafe to drink, and would cause his pipes to rust. He even produced a piece of rusty pipe he said was the result of over-chlorination.

Perez needed to purchase a water filtration system for $4,990, the salesman said.

Perez is a devout Catholic, so any doubts he had were put to rest when the salesman told Perez that he, too, was a Christian and began discussing the Bible. Perez purchased the system with the help of GE Money Bank, a financing wing of GE. This put the cost of the system over the life of the loan at more than $7,500.

Through research, Perez learned later that chlorine levels in Medford water are low, making his new system unnecessary. Medford has one of the highest quality municipal water supplies in the country. He also discovered that the water softener and reverse osmosis equipment he purchased could have been purchased online for under $1,000.

Perez knew he had been scammed and went to small claims court. He won a $7,500 default judgment against American Home Solutions. Because of a procedural legal loophole and for other reasons, Perez was unable to collect his award.

Through a word-of-mouth referral, Perez came to Help Now!

With Help Now!'s assistance, Perez ultimately reclaimed every cent that he had paid for the system. Help Now! first froze Perez's financing payments by placing the entire charge into dispute because of the fraud. Our attorney partner on the matter also discovered that Oregon's home solicitation sales law had not been complied with by the American Home Solutions salesman, giving Perez the right to cancel the deal.

Help Now! then contacted the California contractors' licensing board on Perez's behalf and advised them about the small claims judgment he had obtained by default. Once they were so advised, they threatened to place a lien on American Home Solutions' license in California (American Home Solutions has never been licensed in Oregon).

As soon as the president of the company heard about the impending lien on his company's license in California, he called long distance from Argentina to offer a full and prompt reimbursement for Mr. Perez.

A check for Mr. Perez arrived within days from American Home Solutions.

After coverage of Perez's experience appeared in the Mail Tribune, more than 35 other local Latino families contacted Help Now! with similar stories. When the Associated Press picked up this story, the news was repeated in print and on television in Eugene, Portland, and Pendleton, among other cities. Two companies, American Home Solutions and Aquakleen, were responsible for all the systems sold.

As Help Now! had done for Mr. Perez, advocates immediately contacted the various finance companies involved in the other families' purchases to dispute the purchases and freeze future payments for all the clients still making payments.

The pattern in all these cases had been the same as in Mr. Perez's matter: false representations about the safety of the local drinking water and non-compliance with the Oregon home solicitation sales act.

Both companies had also used unlicensed personnel to install their equipment resulting in pipe leakage and damage to the clients' homes in several instances. In addition, while the sales contracts were written in Spanish, all financing contracts used, irrespective of the finance company involved, were written in English.

Help Now!'s clients in these matters speak no to broken English, and none of them read English. The finance contract terms, in some cases, were at variance with what the Spanish sales contract had stated about financing terms and also with the verbal representations of the Hispanic salesmen about financing terms.

Help Now! coordinated with the Oregon Department of Justice-- getting enforcement staff there to slow their investigation of deceptive trade practices by the two companies in order to give Help Now! greater leverage in negotiating with the principals of both companies. As a result, both companies entered into agreements with Help Now!, approved by all clients, to reimburse the clients for what they each had paid for the system, including interest and other fees, as well as for any damage to homes where leakage had occurred.

This settlement has the companies paying in excess of $100,000 to Help Now!'s clients. Because legal issues were presented, Help Now! had the benefit and pro bono counsel of several of our Portland attorney partners, Jim Hiller and Justin Baxter, each of whom assisted and advised on relevant Oregon law.

In addition to making agreements with the selling merchants to refund clients what they had paid to date, Help Now!, except in the case of one client, has gotten the finance companies not just to freeze but to write off entirely the remaining debt owed them by each client who still was in the process of making payments on the system. Any adverse credit reporting connected to these transactions is also being removed.

Finally, Mr. Hiller and Mr. Baxter are pursuing separate federal lawsuits against selling merchant American Home Solutions and two finance companies involved for violations of federal truth-in-lending laws given the disparities between the financing contracts and the other written and verbal representations in the transaction.

As the recession deepens, new scams are likely to spring up with increased frequency.

"We've advocated for victims of many types of fraud, including loan modifications. The press coverage we received on the water filter case alerted other fraud victims and has allowed us to help far more people. Helping people through crises, that's what we do here," said Larry Kahn, Help Now!'s executive director.