Debt Negotiation

Licensed Debt Negotiators, for a fee, offer the services of assisting a consumer faced with significant debt or negotiating on behalf of a consumer, the terms of a consumer’s obligation to a mortgagee or creditor, including:

• Negotiation of a short sale of residential property (one to four family owner-occupied real property);
• Providing services related to avoiding or delaying actual or anticipated foreclosure proceedings; and
• Addressing the delinquency and default of a mortgage loan.

No fees may be received until the Debt Negotiator fully performs the services.

Check with the Department of Banking to find out if the company or individual you are dealing with is licensed.

• Attorneys licensed to practice in Connecticut when engaged in debt negotiation as an ancillary matter to such attorney's representation of a client
• Financial Institutions
• Licensed Debt Adjusters while performing debt adjuster services
• Bona fide non-profit organizations

Consumer Protections

Debt Negotiators are required to provide in each debt negotiation contract the following consumer protections:

1. Complete and detailed lists of services, costs, and statements of the results to be achieved.
2. A statement that the Debt Negotiator has reviewed the consumer’s debt and an individualized evaluation of the likelihood that the debt negotiation services will reduce the consumer’s debt or, if applicable, prevent foreclosure of the consumer’s home.
3. A three-day right of rescission along with the statement: “If you wish to cancel this contract, you may cancel by mailing a written notice by certified or registered mail to the address specified below.  The notice shall state that you do not wish to be bound by this contract and must be delivered or mailed before midnight of the third business day after you sign the contract.” 

Note:  “ Business day" means any calendar day except Sunday or any of the following business holidays: New Year’s Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans’ Day, Thanksgiving, and Christmas.

Any debt negotiation contract that does not comply with Connecticut Banking Law will be voidable by the consumer.

In addition, the Banking Commissioner has established a schedule of maximum fees that the debt negotiator may charge for specific services.  The Commissioner has the authority to review any fees and charges assessed by the debt negotiator and order the reduction of such fees that the Commissioner deems to be excessive.

Avoid Foreclosure “Rescue” Scams

Be aware of foreclosure rescue scams that target homeowners having serious problems making their mortgage payments.  In these “rescue” scams, a con artist promises to help you save your home, but is actually intent on stealing your home or most of the equity you have accumulated in your home.

According to the Federal Trade Commission, the following predatory scams have been reported: 

• The foreclosure prevention specialist: The “specialist” really is a phony counselor who charges hefty fees in exchange for making a few phone calls or completing some paperwork that a homeowner could easily do for himself. None of the actions result in saving the home.  Turning to a HUD-approved counselor for assistance is one way to avoid this type of fraud.
• The lease/buy back: Homeowners are deceived into signing over the deed to their home to a scam artist who tells them they will be able to remain in the house as a renter and eventually buy it back. Usually, the terms of this scheme are so demanding that the buy-back becomes impossible, the homeowner gets evicted, and the “rescuer” walks off with most or all of the equity.
• The bait-and-switch: Homeowners think they are signing documents to bring the mortgage current. Instead, they are signing over the deed to their home. Homeowners usually don’t know they’ve been scammed until they get an eviction notice.