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New federal law would prevent ‘claw-backs’

Rice, King introduce bill to inform storm victims about duplication of benefits

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Six years after Hurricane Sandy, U.S. Rep. Kathleen Rice announced legislation on Tuesday that would protect storm victims who receive federal disaster relief funds from having to repay benefits that might be considered duplicative.

At a news conference on the boardwalk, Rice, a Democrat seeking re-election, said that the legislation, co-sponsored by her House colleague Peter King, a Republican, would amend the Robert T. Stafford Disaster Relief and Emergency Assistance Act and the Small Business Act to better inform disaster survivors about which forms of federal assistance could be considered duplicative and result in a recoupment, otherwise known as a “claw-back.”

The Federal Emergency Management Agency does not currently offer survivors that information, Rice told reporters. “It’s not fair to subject these survivors to claw-backs after they followed the rules,” she said. “It should be incumbent upon the federal government to provide survivors with clear instructions and comprehensive information so that they can make well-informed decisions. As hurricanes become more frequent and more powerful, the number of Americans applying for disaster relief will only increase. We need to implement these reforms now to protect future storm survivors from encountering this same issue.”

After Sandy, many homeowners were shocked to learn that money they had received from insurance companies to repair their homes was considered a duplication of benefits after they were awarded funding from FEMA, SBA and NY Rising, which reduced the amount of money needed to complete the work.

For those who were told that their homes were more than 50 percent damaged in the storm, the news was even more troubling, residents and officials said, since FEMA required those homeowners to elevate the homes, after many had already spent thousands of dollars on repairs.

Oceanside resident Eli Santos said that Sandy destroyed his home and his martial arts school in East Rockaway. He said that he only recently began the process of elevating his home, but remains displaced, and has run out of money while he pays both rent and a mortgage.

“A few years ago, I did have a problem with duplication of benefits,” Santos told reporters. “I received funds from my insurance company to fix my house, but I also received a letter from the state saying that because I’m substantially damaged, and my home is located in a 100-year flood plain, I could not fix my house. They denied permits until I … brought the house up to code — that means elevate the house. I signed up for NY Rising. Six years later, I’m still waiting.”

NY Rising was launched in April 2013, promoted as a way to help homeowners fill the funding gaps left by FEMA, SBA and their insurance carriers. The program was tasked with distributing nearly $2 billion in federal Sandy aid money allocated to the state.

Canals resident Kevin Reilly, one of the most vocal advocates of changing the NY Rising program, was initially awarded just $712 after the storm to elevate his 1,100-square-foot home, after he laid out $108,000 of his insurance settlement to repair it before NY Rising was created. This was deemed a duplication of benefits, he said, an unreasonable provision that he and many others have fought to change.

“Initially, we were instructed to do what we had to do to get home,” Reilly said of the early days after the storm. “You have these really bad situations where NY Rising … didn’t calculate the insurance payout correctly, and now the poor homeowner is in a position where they’re just getting screwed, so they’re taking money from all directions. A duplication of benefits can be related to someone giving you a Home Depot gift card.”

In July 2015, Rice called on FEMA to waive $6.79 million in disaster relief funding that it had ordered paid back by nearly 1,000 South Shore Sandy survivors who the agency claimed were mistakenly overpaid. Two months later, the U.S. Department of Housing and Urban Development announced that any additional flood insurance proceeds up to $20,000 would not be treated as duplicative. Last Year, Rice pushed for the passage of the Disaster Assistance Fairness and Accountability Act, which prohibits FEMA from clawing back funding after three years. The bill was included in the FAA Reauthorization Act of 2018, President Trump signed into law on Oct. 5.

Still, Rice and others said that many homeowners continue to be told that the money they received was considered duplicative.

“Too many people … have taken out their savings, people have incurred additional costs because they had to go into their 401(k)s,” said County Legislator Denise Ford, a Republican from Long Beach. “They did everything imaginable to be able to get the money, to be able to rebuild and come back. And then to find out after all of this the federal government and New York state is saying that there was an error that was made, you should’ve read the fine print … it totally is unfair.”

Rice said that the proposed Transparent Disaster Relief Act of 2018 would help avoid the confusion that exacerbated an “already difficult recovery process.”

“Sandy survivors were being told to apply for as many forms of recovery assistance as possible, often unaware of which forms could be considered duplicative,” she said. “FEMA encourages survivors to apply for both FEMA funding and SBA loans in order to begin the recovery process as soon as possible. A common scenario after Sandy, she explained, involved homeowners who used NY Rising funds on the same post-storm projects for which they had used other forms of federal assistance.

Rice encouraged homeowners dealing with claw-backs and contractor fraud to contract her office. A spokeswoman for NY Rising declined to comment.

Currently, Rice said, the Stafford Act does not require federal assistance programs to provide survivors with information about duplicative benefits, nor does it provide them with the explicit option to refuse SBA loans.

The bill, she said, would ensure that anyone receiving federal assistance would sign an acknowledgment statement that included a comprehensive list of resources that could be considered a duplication of benefits. The bill would also require the SBA to notify all approved loan applicants that they are not required to accept the loan.

The bill would also require that anyone who is subject to a claw-back automatically be provided with all the information used by the federal government to determine the recoupment amount. “The information is critical to individuals who are challenging a claw-back,” Rice said, “but is currently only available upon request.”