Financial Management and Consumer Protection Flashcards

Under Maryland's Home Improvement Law, what is the maximum deposit a contractor may collect before beginning work on a project?

Answer: One-third of the total contract price

Maryland law limits contractor deposits to one-third (1/3) of the total contract price prior to starting work.

A homeowner cancels a signed home improvement contract within the allowed rescission period. What must the contractor do?

Answer: Return all payments within 10 days of cancellation

Maryland law requires contractors to return all consumer payments within 10 days after a valid cancellation notice.

Which fund compensates Maryland homeowners harmed by licensed home improvement contractors who fail to complete work or perform defective work?

Answer: The Home Improvement Guaranty Fund

The Home Improvement Guaranty Fund provides compensation to consumers damaged by licensed MHIC contractors.

A contractor submits a final invoice that is $4,200 higher than the written contract amount due to undisclosed cost overruns. Under MHIC rules, what is the likely outcome?

Answer: The consumer owes nothing beyond the original contract price without a written change order

Changes to a Maryland home improvement contract must be documented in a written change order signed by both parties; unauthorized overruns are not enforceable.

What is the purpose of requiring Maryland contractors to maintain a separate project escrow account for large deposits?

Answer: To ensure consumer funds are protected and used only for the specified project

Escrow requirements protect consumers by ensuring their deposit money is not commingled with the contractor's operating funds and is available to complete the project.

A Maryland home improvement contractor fails to obtain required permits, and the work later causes structural damage. What consumer protection issue does this primarily trigger?

Answer: Potential contractor liability for damages and grounds for a Guaranty Fund claim

Failure to obtain required permits can expose the contractor to liability for resulting damages and may support a consumer's claim against the Home Improvement Guaranty Fund.

Under Maryland consumer protection law, which practice by a home improvement contractor constitutes an unfair or deceptive trade practice?

Answer: Misrepresenting the quality or characteristics of materials to be used

Misrepresenting material quality or project characteristics violates Maryland's Consumer Protection Act and MHIC regulations.