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Sears customers told to continue paying for worthless extended warranties

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Imagine making a purchase and being told it won’t be delivered but you still have to pay.

Refuse to pay? Then you’ll be getting a call from debt collectors.  

That’s what’s happening to former Sears Canada customers now that the department store chain has gone out of business.

They’re being forced to pay for extended warranties that are no longer being serviced.

Mike Albani of Richmond Hill, Ont., bought four high-end kitchen appliances from Sears in September 2015 and took delivery in March 2016.

He said he was encouraged to buy a 48-month extended warranty, at a cost of $724.28 including HST, and that the salesperson told him if he didn’t use the warranty, the amount would be refunded in Sears gift cards when it expired. 

Mike Albani, of Richmond Hill, Ont., purchased four appliances plus an extended warranty from Sears in late 2015. (CBC)

At zero per cent interest, Albani decided he had nothing to lose and financed the total amount on his Sears credit card.

But then Sears announced it was closing its doors and informed customers they had to keep paying for extended warranties — even though they would not be honoured.

At the time, Sears assured CBC News that customers would be refunded for the cost of the extended warranties at the end of their financing term. 

“Monthly payments will remain the same, but the amount equivalent to future payments for protection agreements will be reduced at the end of the obligation,” a Sears spokesperson told CBC News by email on Oct. 9, 2017.

But Scotiabank, which now owns the Sears credit card accounts, is threatening to send Albani’s account to collections. 

‘Just pay the bill’

Albani said he’s willing to pay for the warranty for the seven months he owned the appliances while Sears was in business, and he wrote to Scotiabank on Oct. 31, 2017, enclosing a cheque for that amount. But he doesn’t believe he should have to pay  the remaining $618.48 for extended warranty coverage in the months after Sears went out of business. 

“[Scotiabank] suggested I could just pay this and the issue would go away,” he said. “The same with their collections company. They said, ‘Just pay the bill and it will be no more of a headache.'”

Scotiabank is telling him his credit history is going to be damaged if he doesn’t pay at least a minimum bill for the extended warranty by Dec. 19.

Albani said he can’t understand the ethics of charging for something that Sears acknowledged it would never deliver.

“I’d like Scotiabank [to] admit that they are not providing service,” he said.

Scotiabank spokesperson Brynne Moore said in an email to CBC News that the bank has no responsibility to provide service for under extended warranty.

A spokesperson from Scotiabank said customers will have to resolve the issue of extended warranties directly with Sears. But customers can’t reach anyone at Sears now that the company is liquidating. (Nathan Denette/Canadian Press)

“When Scotiabank purchased the Chase/Sears’ credit card operation in 2015, we did not purchase the extended warranties or any of the obligations associated with the warranties,” Moore said.

“Those extended warranties and associated obligations are the responsibility of Sears.”

She said customers will have to resolve the issue directly with Sears. But customers can’t reach anyone at Sears now that the company is liquidating.

It’s unknown how many extended warranties were impacted by Sears’ closure, or the value of those warranties.

Calls kept coming

Holly MacIntosh and Alan Benninger of Dundee, N.S., faced a similar situation. Even after Sears said it would remove their extended warranty charges, they continued to be contacted by the company that held the account, Easy Financial.

For the past year they have received calls and emails about the extended warranty — in some cases, accompanied by a statement showing their balance as zero — telling them their account will be sent to collections. Easy Financial also contacted Benninger’s employer about the alleged outstanding amount.

The couple said they continued to make payments, on time, on their purchase (less the amount of the extended warranty), and in February they wrote company, asking not to be contacted again. But the emails and calls kept coming.

CBC News contacted Easy Financial last week. The company subsequently wrote off the remainder of the account, including the amount of their purchase even though the couple did not dispute owing that. Easy Financial has promised the couple will not hear from them again.

‘We expect people to keep their word’

Chris MacDonald, who teaches ethics at the Ted Rogers School of Management at Toronto’s Ryerson University, said it’s hard for people to understand these situations.

“Ethically, it makes sense to me, and I think it would make sense to the average consumer, to say, ‘Look, you’re buying up these warranty obligations, you’re inheriting with it whatever legal obligations the company you’re buying them from had,”‘ he said.

MacDonald said consumers trust the companies where they do business.

Albani said he has been trying for over a year to get Scotiabank to remove the charge for a warranty he never received. (CBC)

“We expect people to keep their word,” he said.

But in cases of insolvency, there is no motivation for the company to do that because they’re effectively gone from the marketplace.

He said it’s unclear whether Sears’ unkept promise to deduct the warranty amount was the result of questionable ethics, a communications issue or paperwork problem, but “it’s pretty clearly unfair.”

MacDonald said cases like this tend to erode consumer trust in business.

“It’s the kind of story that amplifies the standard worries about what business is all about  … worries that companies are really only out for the bottom line and don’t care that much about their customers so I think it’s unfortunate in that way,” he said

Out of pocket for repairs

Albani says his appliances are now breaking down and he’s paying for repairs out of pocket. He’s been told it will cost up to $300 just to have someone come to his home and diagnose the problem.

But he isn’t giving up his fight. He said he will pay Scotiabank to preserve his credit rating if he has to, but plans to take them to small claims court to recover the money.

“I don’t think it’s fair,” Albani said, not just for himself but for many others who bought from Sears who are in the same situation.

“I don’t think Scotiabank is treating anybody fair with any of this. It’s not ethical to charge people for service that’s not been provided now or in the future,” Albani said.

On its website, the company handling the Sears liquidation, FTI Consulting, tells extended warranty holders they are considered “unsecured creditors” and they must wait for the courts to approve a claims process before learning their fate.

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Real Estate

7 Tips For First-Time Home Buyers In Calgary

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Buying a house for the first time can be overwhelming to say the least. If you’re wondering what neighbourhood to go with, what you can afford, or even how to just get started on the process, let us take some stress off your hands! We’ve teamed up with Hopewell Residential to give you 7 tips to ensure the home you end up with is everything you dreamed of.

Hopewell Residential is a five-time Developer of the Year award winner, so their expertise is second-to-none in Calgary and beyond. Who better to learn home-buying tips from than the homebuilders themselves?

Create a checklist of needs & wants

This is a biggie. When you’re buying your very first home, you’ll want to weigh your needs vs. your wants. Ensuring you have what you love in your first home is a big, big deal.

What should you do? Easy. Set up a list of needs and a list of wants, but be pretty strict with yourself, and make sure you take your lifestyle into consideration. With the increase in remote work over the past year, it’s important to keep in mind that a home office or flex room might just be the key to maximizing at home happiness. Especially if you’re thinking you might be expanding your family later on, spare rooms and extra space is key (but more on that later!).

Or for instance, you might need a home in an area with a high walkability score, but you want to be close to certain amenities. Set yourself up with the right level of compromise and the number of homes that actually fit your ‘perfect’ idea will skyrocket.

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‘Don’t give up’: Ottawa Valley realtors share statistics, tips for homebuyers in ‘extreme’ sellers market

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The real estate market in the Ottawa Valley can be summed up this way: people from far and wide are in a buying frenzy, but there’s hardly anything to buy at the “store,” and the limited inventory is overpriced.

This “stampede” — as one realtor described it — will affect rural towns as residents grapple with finding affordable housing and agonize over their inability to purchase homes in their price range.

“We are seeing a lack of inventory in all price ranges,” said Laura Keller, a real estate agent from Carleton Place.

Helen Vincent, a Renfrew realtor, said she’s never seen a market like this in her 36 years of practice. “We postpone offers for four to five days in order to get all the buyers,” she said.

Multiple offers — between seven and 10 — became the norm, with cash offers and no conditions, as buyers faced bidding wars. “In Ottawa, they have up to 50 (offers),” she added.

“It’s very stressful. You’re going to get nine (people) ticked off, and one happy. So many people are disappointed,” Vincent said.

Terry Stavenow, an Arnprior realtor for 40 years, said that “the pent-up need took over with inventory going low. It made a stampede on everything that was available.“

“Brand new housing — it’s very much gone. Several building developers are rushing to get inventory. They usually don’t do construction in the winter months,” said Stavenow.

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Real Estate

10 Tips For First-Time Home Buyers

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Buying a home for the first time is exciting and a commitment to the future. It’s often challenging, too, and the process requires a lot of steps, many of which can be tricky to navigate as a first-time home buyer.

What are some things you should keep in mind as a first-time home buyer?

First-Time Home Buyer Tips

Here are 10 tips to keep in mind as you begin your journey toward homeownership.

1. Have Your Finances in Order

It’s wise to begin saving as early as possible once you’ve made the decision to purchase a house. You’ll need to consider the down payment, closing costs (which often range from 2% to 5% of the down payment), as well as move-in expenses.

You also need to understand the other costs of homeownership, such as mortgage insurance. property taxes, utilities, homeowner’s insurance, and more.

2. How Much Can You Afford?

Knowing how much you can realistically afford in a home is another important financial consideration. Look for the home of your dreams that fits your budget.

One way to avoid future financial stress is to set a price range for your home that fits your budget, and then staying within that range. Going through the preapproval process will help you understand what price range is realistic for your budget.

3. Make Sure Your Credit is Good

Another thing to keep in mind as a first-time home buyer is your credit score because it determines whether you qualify for a mortgage and affects the interest rate that lenders offer. 

You can check your credit score from the three credit bureaus – Experian, Equifax, and TransUnion.

This is another good reason for getting preapproved before you start your search. Learn more about the preapproval process and your credit score.

4. Choose The Right Real Estate Agent

A good real estate agent guides you through the process every step of the way. He or she will help you find a home that fits your needs, help you through the financial processes, and help ease any first-time buyer anxiety you may have.

Interview several agents and request references.

5. Research Mortgage Options

A variety of mortgages are available, including conventional mortgages – which are guaranteed by the government – FHA loans, USDA loans, and VA loans (for veterans).

You’ll also have options regarding the mortgage term. A 30-year fixed-rate mortgage is popular among many homebuyers and has an interest rate that doesn’t change over the course of the loan. A 15-year loan usually has a lower interest rate but monthly payments are larger.

6. Talk to Multiple Lenders

It’s worth your time to talk to several lenders and banks before you accept a mortgage offer. The more you shop around, the better deal you’re liable to get – and it may save you thousands of dollars.

7. Get Preapproved First

Getting a mortgage preapproval (in the form of a letter) before you begin hunting for homes is something else to put on your checklist. A lender’s preapproval letter states exactly how much loan money you can get.

Learn more about the preapproval process and how preapproval provides you with a significant competitive advantage in our article How Preapproval Gives You Home Buying Power.

8. Pick the Right House and Neighborhood

Make sure to weigh the pros and cons of the different types of homes based on your budget, lifestyle, etc. Would a condominium or townhome fit your needs better than a house? What type of neighborhood appeals to you?

9. List Your Needs and Must-Haves

The home you purchase should have as many of the features you prefer as possible. List your needs in order of priority; some things may be non-negotiable to you personally.

10. Hire an Inspector

Hiring an inspector is another crucial step in the home buying process. An inspector will tell you about existing or potential problems with the home, and also what’s in good order. You can learn more about home inspections and how to find a home inspector through the American Society of Home Inspectors website.

Buying a home for the first time is a challenge, but it’s one you can handle with the right planning and preparation.

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