Connecticut Law Now Bans Upfront Fees, Requires Licensing & Bonding When Offering Loan Modification Services

In Hartford, Connecticut, The Day reports:

• For the first time in Connecticut, firms and individuals offering debt relief they negotiate with a consumer's creditors will need to be licensed and will be prohibited from charging upfront fees.(1) A new law that goes into effect Thursday is designed to stop a growing number of scams by so-called “debt negotiators” who fraudulently claim to help consumers repay household debt, or credit card or mortgage debt, but instead charge hefty upfront fees, never reduce the debt and sometimes disappear - leaving the already-burdened consumer with even more expenses, and at times an even bigger debt load.

• Attorney General Richard Blumenthal, who authored the new consumer-based legislation, said he's handled more than 100 complaints involving debt negotiators within the past year alone. And he said he's investigating as many as 10 firms for allegedly fraudulently promising to help consumers repay household or credit card debt or a delinquent home mortgage. He declined to name the companies.

For more, see Connecticut clamps down on 'debt relief' companies.

(1) Among other protections and reuirements are: Filing a surety bond, Not refer to state licensing or bonding as an endorsement, Disclose 10-year criminal history on license application, Evaluate likelihood of success in reducing debt or saving a home before contracting with the consumer, Sign a written agreement with the consumer, Provide complete list of services, costs and results to be achieved, Perform services outlined in contract before charging fees, Adhere to fees regulated by the state banking commissioner, Allow a 3-day right of rescission for the consumer to cancel the contract, Comply with state law or have the contract voided and subject to enforcement.