State Files Suit Against Unlicensed Debt Adjusters
Note: this press release was issued by the Connecticut Attorney General's Office and not by the Department of Banking. For further information on legal proceedings, please contact their press secretary at (860) 808-5324.
August 28, 2001 -
Attorney General Richard Blumenthal and Banking Commissioner John P. Burke today announced a lawsuit filed against two debt-adjustment companies for conducting business without a license.
The lawsuit was filed against Credit Services Alliance, LLC and Debt Management Services, LLC, both of Bloomfield, two companies that claim to act as intermediaries between consumers and their creditors. In Connecticut, only non-profit organizations may act as debt adjusters, and those companies must be licensed by the State Department of Banking.
The lawsuit alleges that the companies received money from consumers to pay consumers' debts, and that they failed to forward those funds to creditors.
"These companies apparently pocketed money meant to reduce debt -- victimizing hard-pressed consumers who sought to pay creditors and face their financial responsibilities," Blumenthal said. "Our law requires debt adjusters to be licensed, to safeguard clients' funds in a separate account, keep proper records, and make payments to creditors promptly. These companies violated each and every one of these provisions. Profiting from consumers who deal with debt problems is particularly reprehensible."
"We're asking the court to shut down these companies and pay consumers for the harm they caused," Blumenthal added.
Burke said his agency's investigation into the unlicensed activities of Credit Services Alliance and Debt Management Services uncovered a number of consumers who honestly believed that their bills would be paid and their credit restored.
"Instead, their bills became even more delinquent and their credit status more tainted than it was originally," Burke said. "It's imperative that we move swiftly to stop this unlawful activity, obtain refunds for the consumers affected and restore confidence in an industry that offers counseling, money management advice and assistance in debt repayment programs for persons faced with significant debt or bankruptcy."
A show cause hearing is scheduled for Tuesday, September 4 at 10 a.m. in Hartford Superior Court.