Connecticut General Assembly
Press Release
Banks Committee Chairs, Attorney General Blumenthal: Legislation Will Protect Vulnerable Consumers From Predatory Scams
Urge governor to sign legislation once it reaches her desk
June 18, 2009
Under the legislation, for-profit and nonprofit debt negotiation companies, including so-called "foreclosure rescue" companies, would be regulated and required to register with the state Department of Banking, pay a license fee and post a surety bond. The officials today urged Governor M. Jodi Rell to sign the bill once it reaches her desk.
"We know that with high foreclosure rates in Connecticut and around the country, scam artists are preying on the vulnerability of desperate homeowners," said Senator Duff. "Since mortgage lenders publish notices before foreclosing on homes, potential victims are easy for the unscrupulous to find. They often use a variety of tactics to coerce homeowners in distress to trust that, for a fee, their foreclosure or debt worries will disappear. This bill will help to protect families and homeowners who are only trying to solve their financial problems. I urge Governor Rell to sign this bill."
"I urge the governor to sign our bill protecting distressed debtors and homeowners from predatory promises of debt reduction," said Attorney General Blumenthal. "This legislation is imperative to protect consumers from lead-filled lifelines-debt rescue schemes that may actually sink consumers deeper into debt the more they struggle."
Attorney General Blumenthal continued, "Our legislation will establish licenses and strict standards for debt negotiators-prohibiting advance fees and deceptive deals from financial bottom feeders. It will require clear disclosures and disclaimers about what consumers will realistically receive, if anything, from so-called debt rescue services. It stops financial snake oil pitches-empty promises to stop foreclosures, save homes, reduce mortgages and erase credit card debt, eliminate back-tax obligations and rehabilitate bad credit histories.
"The use of debt negotiators by those in financial difficulty has escalated in this troubled economy and while there are many credible credit counselors, the number of predatory so-called debt fixers has also proliferated," said Representative Barry. "You see them lined up in the back of courtrooms during foreclosure cases like ambulance chasers ready to pounce on unsuspecting and vulnerable people."
The bill also would prohibit up-front fees and require companies to evaluate and notify the customer of the likelihood of success in saving a consumer's home or reducing their debt. It requires a written contract specifying all fees and services and grants a consumer the right to rescind their contract within three days.
Additionally, debt negotiators would be required to provide credit counseling and budgeting assistance, evaluate a debtor's ability to meet anticipated payments and confirm that creditors will accept the payment terms and schedule. Payments to a debt negotiator must me remitted to creditors in a timely fashion, a protection designed to keep payments flowing so that consumers will not be assessed late fees and interest charges. Finally, the bill requires regular financial statements to consumers on account activity.
The legislation-Senate Bill 950-was passed unanimously both the House of Representatives and the Senate. The 2009 regular legislative session adjourned on June 3.