NYC's $15M consumer protection fund is going unused as homeowners clamor for help

A $15 million trust fund set up to help New York City homeowners bilked by home improvement contractors has gone mostly unused for years — even as consumers beg the city for help.

The Home Improvement Contractor Trust Fund dates back to 1997, and was making a steady stream of payments to consumers wronged by licensed contractors. But, payouts dwindled after the city’s consumer affairs department stopped hearing cases in 2017. Since then, the trust fund has accumulated revenue through contractor license fees, but only paid out a fraction of that revenue to help consumers.

All the while, consumers say they are still being cheated.

“The money is just sitting there and they’re creating all these unnecessary roadblocks to get to the money,” Lori Ciraolo, a Brooklyn homeowner, said in an interview.

In 2022, Ciraolo hired a contractor licensed by the city’s Department of Consumer and Worker Protection. The contractor’s work ended up being shoddy and cost Ciraolo upwards of $50,000. She made a complaint to the consumer affairs department in hopes of accessing the trust fund.

“I was absolutely hopeful because I realized that there is no way this guy was going to pay me,” Ciraolo said. “And if he didn't pay, I’d at least have access to the trust fund.”

But accessing the fund has become exceedingly rare.

According to data provided by the city’s Independent Budget Office, between 2010 and 2017 the fund averaged $876,000 a year in payments to cheated consumers. Since 2018, the average dropped to less than a fifth of that, averaging just $153,000 to consumers. Meanwhile, the trust fund grew an average of $1.8 million per year.

Payments to wronged consumers began drying up after a bureaucratic change under the administration of Mayor Bill de Blasio in 2017 that consolidated consumer affairs tribunals in another department. Consumer affairs officials under Mayor Eric Adams say they hope further bureaucratic changes will remedy this and release more of the trust fund’s money.

Michael Lanza, a spokesperson for the Department of Consumer and Worker Protection, declined multiple requests to explain why the trust fund continues to add money without paying consumers. He said further rule changes will streamline the process to access the fund.

“DCWP continually explores creative ways to reduce the burden on consumers,” Lanza said. “The new rule provides an additional route for consumers to access relief.”

The new rule went into effect last week and is designed to remove some of the hurdles to accessing the trust fund and pay wronged consumers up to $10,000 out of the trust fund without the contractor’s cooperation.

Consumer watchdogs however say the rule change won’t hold crooked contractors accountable, and isn’t enough money compared to most remodeling jobs.

“It’s screwing consumers,” said Susan Kassapian, a retired assistant commissioner for the city’s consumer affairs department. “While $14.7 million is sitting in a trust fund doing no good to anyone.

“Many complaints are more than $10,000 and the Home Improvement Trust Fund is supposed to pay up to $25,000 and it's supposed to give you an award that can then turn into a judgment and you can then try to collect the rest of it.”

According to city data, about 44% of past trust fund payments were higher than $10,000 meaning they would not have been helped by the city’s latest rule change.

Councilmember Julie Menin from the Upper East Side, and Commissioner of Consumer Affairs from 2014 to 2016, called the unused trust fund “unfortunate” and says she’s waiting to see how many consumers complain before deciding if DCWP’s rule change is sufficient.

“On the one hand, it provides some immediate relief to consumers,” she said in an interview. “On the other hand, it's generally not the full relief that they are looking for because oftentimes these complaints are far in excess of that amount.”

Critics of the city’s consumer affairs efforts say the growing unused trust fund is a symptom of lax consumer protection in the city.

The only way consumers could access the trust fund was to first go through city-facilitated mediation. However, these mediations became decreasingly successful after the elimination of the departmental tribunals.

Karen Miller, a retired administrative law judge who oversaw the now defunct consumer affairs tribunals, said without the threat of judgment, mediations are less successful.

“There was no reason for the contractor to mediate because nothing was going to happen to him,” Miller said in an interview.

Before the department eliminated the tribunals in 2017, mediation success rates hovered above 60%. They’ve since dropped to where only about a third of mediations are successful. For home improvement contractors, successful mediations stand at around 25%.

“Every contractor in the city of New York knows that they don't bring hearings anymore,” Kassapian said. “They're abandoning a crucial part of the enforcement job that they have and as a result, people aren't complying with the law.”