Angie’s List Calls for Uniformity, Enforcement, Consumer Protection in Contractor Licensing Laws

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Angie's List Calls to Create Contractor Licensing Laws Consumers Can Understand

Licensing laws vary greatly across the country and even among cities within the same state, which makes it hard for contractors to keep track of what’s required and what isn’t. Consumers don’t have a chance of figuring it out without help

Angie’s List Founder Angie Hicks today called on state lawmakers around the country to enact uniform and understandable trade licensing laws that give consumers an assurance that anyone holding a license is qualified to do the job it covers.

She also asked lawmakers to set aside a portion of licensing fees for consumer protection funds, as a few states already do, so homeowners who are bilked by licensed contractors can recover their lost investments. Hicks will be sending letters to governors across the country outlining the need for better trade licensing laws.

“Most trade licensing is too complicated and offers too little enforcement or protection,” Hicks said. “Homeowners should be able to trust that if a governmental body has given a license to a contractor, that the contractor is reliable and qualified. They should also have access to some recompense if they rely on a licensed contractor who doesn’t deliver, or worse yet, cheats them.”

Hicks’ call for better laws around the country coincides with a strengthening of Angie’s List policies about trade licensing. Angie’s List, (http://www.angieslist.com), the nation’s leading provider of consumer ratings on local service companies, has helped consumers find high quality contractors for the past 14 years. Traditionally, the company has relied on companies to list their trade license status and asked members to verify that status on their own.

“Licensing laws vary greatly across the country and even among cities within the same state, which makes it hard for contractors to keep track of what’s required and what isn’t. Consumers don’t have a chance of figuring it out without help,” Hicks said. “Consumers are still responsible for determining the license status of the contractors they hire, and Angie’s List will be working to make it easier for them. But the key to really accomplishing a better system will fall to lawmakers.”

While lawmakers may debate how – or if – to address the issue, Angie’s List is now requiring companies on the List to attest that they are in compliance with state and local laws. Like the IRS, Angie’s List will audit contractors to verify they are following the law. Those found to be out of compliance will have an opportunity to comply or face actions from Angie’s List that will include alerting members to their true status.

Hicks said it’s probably unrealistic to expect all states to adopt the same uniform licensing law that requires minimum training and qualifications, proper enforcement and consumer protection. A state-by-state approach is likely more realistic. “Even if each state has different trade licensing laws, having one direction per state to follow would be better than the mish-mash we have now,” she said.

Most states issue licenses for at least some contractors, including plumbers, electricians, heating and cooling specialists, handymen, builders and remodelers. However, the licensing requirements are anything but easy to follow. The complexity of the issue is laid out in the September issue of the Angie’s List Magazine: http://magazine.angieslist.com/

  •     15 states have state licensing only
  •     10 states have state licensing and registration
  •     9 states have state licensing, as well as local licensing
  •     4 states have state licensing and local registration
  •     2 states have state licensing, as well as local licensing and local registration
  •     4 states have state licensing and registration, as well as local licensing
  •     1 state has state registration and local licensing
  •     4 states (including Washington D.C.) have local licensing only

Source: Angie’s List research of continental U.S. trade licensing laws
“A current trade license won’t guarantee that your contractor will complete your job perfectly, but it will give you some insight into how your contractor handles his or her business,” Hicks said. “In communities where licensure is required, unlicensed contractors are breaking the law. If he or she breaks this one, what others will they break? If the contractor doesn’t know he or she needs a license to operate, what does that say about how on top of things he or she is?”

In most states, a valid license indicates the holder carries insurance and workers’ compensation, but you still need to be sure the contractor has adequate and the right kind of insurance. In many cases, only licensed contractors are allowed to pull permits. If your contractor wants you to pull permits for your project, you should consider that a red flag and investigate further, Hicks said.

Contractors cannot add themselves to Angie’s List. Only consumers can do that after they’ve had an interaction with a service provider. Once a company is added to the List, Angie’s List contacts the company to provide information to be displayed in its profile for member review that includes whether the company is licensed, bonded and insured, as well as contact information and other details members find helpful.

5 steps to verify contractor credentials
1. Determine if contractors must be licensed to perform the job. Many municipalities have their own requirements in addition to, or instead of, state laws. Check with local departments of commerce, consumer affairs or professional regulators.
2. If licenses are required for your project, ask for a trade license number — be sure you don’t receive a business or occupational license number.
3. Ask for proof of bonding and insurance, in addition to licensure.
4. Check that all are current and cover your project. Most state licensing boards have an online database you can search, or a hotline you can call, to make sure contractors’ licenses are valid and current. While you’re there, check if the contractor has ever been disciplined.
5. Keep all paperwork involved in your project, including proof of licensing, bonding and insurance, the contract, invoices, proof of payment, and all letters and e-mails. Photos of the job in progress can be helpful, too.

5 steps to verify contractor credentials
1. Determine if contractors must be licensed to perform the job. Many municipalities have their own requirements in addition to, or instead of, state laws. Check with local departments of commerce, consumer affairs or professional regulators.
2. If licenses are required for your project, ask for a trade license number — be sure you don’t receive a business or occupational license number.
3. Ask for proof of bonding and insurance, in addition to licensure.
4. Check that all are current and cover your project. Most state licensing boards have an online database you can search, or a hotline you can call, to make sure contractors’ licenses are valid and current. While you’re there, check if the contractor has ever been disciplined.
5. Keep all paperwork involved in your project, including proof of licensing, bonding and insurance, the contract, invoices, proof of payment, and all letters and e-mails. Photos of the job in progress can be helpful, too.

5 terms every homeowner should understand before they hire
License: Trade licenses are mandated by state, county and local laws. A license generally requires paying a fee, passing competency tests about business practices and trade skills, and showing proof of insurance. Some municipalities also require a background or credit check and fingerprint contractors.
Bonding: Bonding is a bit like insurance in that contractors arrange with a private bond issuer or a recovery fund held by the licensing municipality to set aside funds to use if projects go wrong. Homeowners may petition for reimbursement through the fund if contractors harm them financially because of shoddy work or failure to pay subcontractors as promised.
Insurance: At a minimum, all contractors should carry liability and workers’ compensation insurance.
Liability insurance: Covers property damage and bodily injury losses that occur as a result of the contractor’s work. Liability insurance will not normally pay the cost of removing, repairing or replacing bad work by the contractor.
Workers’ comp: Provides payments to injured workers, without regard to who was at fault in the accident, for time lost from work and for medical and rehabilitation services. It also provides death benefits to surviving spouses and dependents.

Angie’s List is where thousands of consumers share their ratings and reviews on local contractors and companies in more than 425 different categories. Currently, more than 750,000 consumers across the U.S. rely on Angie’s List to help them find the right contractor or company for the job they need done. Members have unlimited access to the list via Internet or phone; receive the award-winning Angie’s List magazine, which includes articles on home improvement and maintenance, consumer trends and scam alerts; and they can utilize the Angie’s List complaint resolution service. Get more information about Angie’s List at http://www.angieslist.com View the latest Angie's List News Releases in our Press Center and read Angie’s blog at http://www.angiehicksblog.com.

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