There will always be dishonest people looking for an easy buck in this world, which means there will always be scams right around the corner that you should watch for. One of the most popular scams being perpetrated this past year in the tough economy is deceitful debt settlement companies offering their “services” to escape debt. These shifty companies are capitalizing on vulnerable homeowners by offering them a quick fix to eradicate their debt.
“There is no such thing as a quick
fix,” said Senator Bob Duff (D-Norwalk) co-chair of the General Assembly’s Banks Committee. “These debt settlement companies prey upon the vulnerability of desperate homeowners, using a variety of tactics to coerce homeowners in distress to trust that their foreclosure or debt worries will disappear if they pay a fee.” Duff went on to say, “In 2009, we passed legislation with the support of then-Attorney General Richard Blumenthal that targeted these types of companies. Under our law, for-profit and nonprofit debt negotiation companies are required to register with the state Department of Banking, pay a license fee and post a surety bond. Consumers in Connecticut who are struggling with their debts should check that any company that promises help is properly licensed and registered before entering into any sort of arrangement.”
The new Connecticut law debt settlement companies must abide by now hinders the deceptive companies by requiring them to be licensed with the state which also requires a surety bond. This will curtail many shady companies right off the bat because most are not willing to pay the license or bond fee in order to operate legally. The surety bond will also guarantee that the company obtaining the bond will follow the rules and regulations that are set by the state. If the debt settlement company does not honor the regulations set by the state, a claim will go out on the bond which will be paid by the surety company who issued the bond.
“These services can entail so much more than a ‘payment plan.’ They can involve complicated financial arrangements that directly affect our personal financial health and security, and our ability to pay our bills and honor our most basic commitments”, said William Tong (D-Stamford), who is also co-chair of the General Assembly’s Banks Committee.
The new law, Public Act 09-208 also forbids up-front fees and requires settlement companies to assess and inform the client of the probability of success in salvaging their home or decreasing their debt. A contract is also required detailing all fees and provides a client the right to withdraw their contract within three days.
This enactment requiring a surety bond to be filed with Connecticut benefits both the clients looking for financial aid and legitimate debt settlement companies running an ethical business. Other top scam businesses this past year according to the Better Business Bureau (www.bbb.org) include job hunter, work-from-home, lottery and sweepstakes, and advance fee loan scams.