Minnesota Rusco fallout: Attorney general advice for customers on recovering funds

NEW HOPE, Minn. (FOX 9) - Customers directly impacted by the closure of the home renovation company Minnesota Rusco have options to recoup their funds, according to a consumer alert shared by the Minnesota Attorney General's Office. 

Anyone entitled to lost funds is encouraged to keep their receipts, file a complaint with the attorney general's office and seek recovery through the Minnesota Department of Labor and Industry Contractor Recovery Fund.

READ MORE: Minnesota Rusco files for bankruptcy after abrupt closure

Options for customers affected by Minnesota Rusco closing

What you can do:

Attorney General Kieth Ellison is encouraging customers to preserve all records, including contracts and receipts, and to contact their payment sources if they paid with credit or financing. Credit card companies may allow chargebacks for undelivered services, and the Holder Rule might apply to those who financed their payments, potentially offering a refund.

READ MORE: Minnesota Rusco fallout: What can current customers do?

The attorney general is also encouraging affected consumers to file a complaint with his office. This will help track developments and provide additional information about consumer rights and bankruptcy proceedings. 

Another option includes seeking recovery through the Minnesota Department of Labor and Industry Contractor Recovery Fund. This fund can pay up to $550,000 on behalf of a licensed residential contractor, with a limit of $100,000 per consumer. However, obtaining a final judgment against Minnesota Rusco is necessary, which is complicated by the company's bankruptcy filing.

What's next:

State authorities are still exploring ways for consumers to obtain judgments that will allow them to access state funds and advocate for customers impacted by the company's sudden closure. 

Private equity firm ‘BlackRock’ blamed

What they're saying:

Attorney General Keith Ellison released the following statement:

"Private equity firms should not be allowed to gamble with your hard-earned savings and then hide behind corporate structures to avoid accountability. I am outraged on behalf of the families across Minnesota who trusted this well-known, Minnesota company, only to have the rug pulled out from under them by private equity firms pulling strings behind the scenes. These firms’ relentless pursuit of short-term profit at the expense of Minnesota jobs, businesses, and families is deeply troubling and raises fundamental questions about how we treat consumers and regulate private equity." 

The news release from the attorney general's office continued by saying the closure is part of a "roll-up" strategy used by the private equity firm "BlackRock" where they buy up local businesses in the same industry and finance the acquisitions with heavy debt, which leaves the businesses vulnerable and highly leveraged. 

This, in turn, maximizes returns for the private equity firm by shifting the risk of that debt to the businesses they acquire, while the private equity firm reaps most of the financial benefits.  

The attorney general's office points out that federal law places "secured creditors" or those with collateral backing their claims, first in line for repayment when a company files for bankruptcy. However, customers who put down deposits for unfinished work are treated as "unsecured creditors" and have a harder time recovering funds. 

Abrupt closing of Minnesota Rusco 

The backstory:

Minnesota Rusco abruptly closed its doors after 70 years in business, and employees said they had no notice from the parent company that made the decision.

READ MORE: Rusco employees 'blindsided' by sudden closure after 70 years in business

Minnesota Rusco released the following statement on their website: "With heavy hearts we regrettably inform you, Minnesota Rusco, a Renovo Home Partners company, has ceased all operations. We would like to wish our staff and their families the best as they navigate these difficult times and thank all of Minnesota for their 70 years of support and trust."

Former employees told FOX 9 that they were notified at 8 a.m. that the parent company, Renovo Home Partners, had filed for bankruptcy and Minnesota Rusco was ceasing operations. 

Minnesota Rusco filed for Chapter 7 bankruptcy shortly after, meaning that the company will have to sell its assets to pay off its debt. 

Those former employees were given just three days of health insurance, and said they were "blindsided" by the decision.

The home improvement company was known for its advertisement jingle after being part of the Minnesota business community for decades.