Latest Posts
Home > Debt Articles > New Regulations to Restrict Debt Settlement Forms Becomes Law, Now.

New Regulations to Restrict Debt Settlement Forms Becomes Law, Now.

Last year Attorney General Blumenthal in Connecticut fought to get new laws in place to protect consumers from debt settlement and debt negotiators that charge consumers and up-front fee to settle debts.

The law has the following provisions:

  • Obtain a Connecticut debt negotiators license and file 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

According to Blumenthal, the typical scam involves a consumer paying large upfront fees – often $1,000 to $3,000 or more – to a company claiming to negotiate with creditors to lower the debt. Instead, the firm takes the money, never applies it to the debt, and sometimes vanishes.

Typically, a “debt negotiator” is any individual or firm that assists a person in helping to reduce, manage or settle consumer or mortgage debt owed to creditors. These enterprises can refer to themselves as debt-settlement companies, debt-management companies, mortgage modification companies or even foreclosure rescue firms.

Connecticut already licenses so-called “debt adjusters,” but those individuals or firms receive and submit funds to a creditor without actually negotiating on the debtor’s behalf, said Marlene Mannix, assistant director of the consumer credit division of the Connecticut Department of Banking.

This new expanded law prohibits a debt negotiator from charging upfront fees, requiring the enterprise to perform services outlined in a contract first. Before a contract is signed, the debt negotiator is required to register for a state license and evaluate the likelihood of success in reducing debt or saving a home for the consumer. Source

New Regulations to Restrict Debt Settlement Forms Becomes Law, Now.
Get Out of Debt Guy – Twitter, G+, Facebook

New Regulations to Restrict Debt Settlement Forms Becomes Law, Now. by

Share This and Spread the Word

About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

Get My FREE Get Out of Debt Guy Newsletter

It is the smart thing to do.

I promise to keep your email safe and secure.

Close

I want to keep you posted each weekday with just one email about the latest get out of debt news, scam alerts and information to beat back debt.

You can unsubscribe at any time with just one click.

After you subscribe, check your email to confirm your subscription. If the confirmation email does not appear in your inbox in a few minutes, check your spam folder for it. Sometimes it likes to annoyingly hide there.


  • It will keep you posted on the latest scams.
  • You will be alerted to the latest articles.
  • You will wind up smarter than everyone else dealing with debt.