A debt settlement insider sent me the following email they received from Global Client Solutions.
Subject: IMPORTANT NOTIFICATION from Global Client Solutions – State of Connecticut
The following is pursuant to direction from the State of Connecticut, Department of Banking:
Effective May 16,2012, customer fees assessed to account holders residing in the state of Connecticut may not be processed until your organization provides written notice to Global that it is either (i) licensed for debt negotiation by the State of Connecticut or (ii) exempt from such licensing.
Please be advised that if your Connecticut consumers contracted with entities/Affiliates other than your organization, then such written notice must be provided from those corresponding entities/Affiliates.
Frankly I’m surprised more states have not taken similar action. If they had years ago the debt relief space would look much different today.
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I applaud CT for taking this action but I’m afraid what they are not realizing is that it causes more harm than good. Now before you haters get your panties in a bunch, hear me out.
I absolutely agree that every company should be licensed, hell if it were up to me all sales agents would be fingerprinted but it’s not a matter of not wanting to get licensed or staying away because of fee caps.
The ONLY reason companies will stay away from CT and any other state that is anti-settlement is because of the $40,000 bond requirement and licensing costs which total more than $5,000 a year…and that just for one state!
Take for example an average consumer with $30k in debt in a 36 month program with a 10% fee cap and an average settlement of 40%, this will create about $600 a year in revenue. The cost per acquisition these days is around $250/$300. Remember that it takes at least 6 months to break even so contrary to popular belief (unless you are well funded with investment capital) growth from revenue will be very slow and when you take the cost of licensing combined with the 10% fee cap and do the math it just doesn’t add up.
My point is that there are many ethical, hard working debt relief companies that can provide no upfront fee services to help consumers in CT avoid bankruptcy but cannot afford the high cost of licensing. The bond requirements are overkill. There is very little to no risk to consumers when they are able to have a company negotiate their debt and not get paid until each each settlement is approved by the consumer and settled so there is no longer a need for the bonds. Simple E & O insurance would provide sufficient protection against any fraud.
These rules create an environment where bankruptcy is the ONLY option for CT consumers in need of debt relief.
Have to assume same for Notworld. Who are the other escrow players?
CT has a fee cap right?
Affiliate licensing too? Even if the affiliate is part of a “legal model”?
The agony of it all….
Exemptions on file? Will a note from my attorney work? Are affiliates selling a legal model exempt by extension, or would the attorney have to vouch for their affiliates? It would seem from the limited read that the attorney might be exempt, but the sales affiliate is not? After this deadline, is it not safe to assume the GC list is already expected at the CT department of banking? Is it safe to assume the department already has a list and will simply cross reference the May 16 list with one already compiled and begin target practice thereafter? If the list in hand now has a company name, and the May 16 list does not contain that same company name, would that name then be a coke can atop a fence post on the back 40?
Totally true about how this approach if used by all states that require licensing and also have clearly spelled out exemptions providing an effective check and balance. This is a very small and relatively un-intrusive item to enact that would hold the escrow resources accountable then trickle out from there.
Giving up CT would not trouble most companies. Giving up many more states would. This should be circulated to every state agency tasked with oversight of these businesses.