Global Client Solutions, one of the major escrow companies that handles funds for debt settlement clients, was charged with being an unlicensed money transmitter by the state of Connecticut and then entered into a consent order to resolve the issue. According to the records, on November 30, 2011 Global Client Solutions received a cease and desist letter from the state and a Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing.
The agreement strikes at the very heart of the the flow of money from Connecticut residents, through Global Client Solutions to debt settlement companies. With this charge and consent order Global Client Solutions is now tasked with making sure the debt settlement companies they provide services for are actually licensed in Connecticut. Something they should have been doing for every state all along.
You’ve certainly got to give a hat tip to Connecticut for being clever on this approach to clean up unlicensed debt settlement companies who serve Connecticut residents.
The allegations made by Connecticut were:
Global: (1) engaged in the business of money transmission in Connecticut without a license, in violation of Section 36a-597(a) of the Connecticut General Statutes; (2) engaged in the business of debt adjustment in Connecticut without a license, in violation of Section 36a-656(a) of the Connecticut General Statutes, as amended by Public Act 11-216; (3) failed to cooperate with the Commissioner, in violation of Section 36a-17(d) of the Connecticut General Statutes; (4) made a statement to the Commissioner which was, at the time and in the light of the circumstances under which it was made, false or misleading in a material respect, in violation of Section 36a-53a of the Connecticut General Statutes; and (5) made untrue statements of a material fact or omitted to a state material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, in violation of Section 36a-53b of the Connecticut General Statutes, in effect prior to October 1, 2011, and Section 36a-53b of the Connecticut General Statutes, as amended by Public Act 11-216;
As a result of the above actions, Global Client Solutions agreed to enter into a consent agreement without admitting or denying any of the allegations. As part of that agreement, Global Client Solutions is to pay the State of Connecticut $150,000 as a civil penalty. Additionally, Global Client Solutions institute procedures to reasonably ensure that the debt negotiation companies with which it does business in Connecticut (“DNEGs”) are either duly licensed or exempt from debt negotiation licensing in Connecticut, including, but not limited to:
- No later than the date this Consent Order is executed by Global, Global shall send a notice to all DNEGs advising them that as of May 16, 2012, Global will no longer process DNEG fee disbursements on behalf of Connecticut residents who have engaged such DNEG, unless, prior to May 16, 2012, such DNEG advises Global, in writing, that it is licensed or exempt from debt negotiation licensing in Connecticut;
- No later than May 25, 2012, Global shall provide copies of all written responses received from such DNEGs pursuant to paragraph (3)(a) to Carmine Costa, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or carmine.costa@ct.gov;
- Effective May 16, 2012, Global shall no longer process fee disbursements to a DNEG, unless such DNEG has advised Global, in writing, that it is licensed or exempt from debt negotiation licensing in Connecticut. In addition, Global shall cease processing fee disbursements to a DNEG if the Commissioner notifies Global that (1) such DNEG is not licensed in Connecticut, (2) the Commissioner has issued a final decision ordering such DNEG to cease and desist from violating Section 36a-671 of the Connecticut General Statutes, or (3) the Commissioner has issued an advisory opinion indicating such DNEG is not exempt;
- Effective ninety (90) days after the date this Consent Order is executed by Global, Global shall cease receiving its monthly service fees from the disbursement account of any Connecticut resident who is no longer actively participating in a debt settlement program as a result of Global no longer processing fee disbursements to the DNEG, pursuant to paragraph (3)(c) above, and shall promptly return all monies held in such accounts on behalf of Connecticut residents;
- Upon execution of this Consent Order by Global, Global shall no longer accept new agreements to establish disbursement accounts and process payments on behalf of Connecticut residents who have engaged a DNEG, unless prior to such acceptance, such DNEG has advised Global, in writing, that it is licensed or exempt from debt negotiation licensing in Connecticut; and
- For a period of eighteen (18) months from the date this Consent Order is executed by Global, Global shall provide copies of all written responses received from DNEGs advising Global that the DNEG is licensed or exempt from debt negotiation licensing in Connecticut to Carmine Costa, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or carmine.costa@ct.gov. – Source
Global Client Solutions also agreed to waive all monthly fees for existing Connecticut residents for three months.
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If every state did this, and if the CFPB were to later do this when positioned to (though with shared enforcement of the TSR they could probably find a way to do it now) – and were to apply this to all of the escrow providers serving the industry……. POP…….BAM!!! BOOM!!!!!!!!!!
Lowest cost – most immediate and least intrusive mother of all cleanses would be the result.
As I understand it, the “salt water” bowel cleanse is the most violent.
The CT approach – if done nationwide with the escrow companies – would be the salt water settlement company cleanse.
Good on ya CT.
Im afraid Im going to have to disagree. Banning upfront fees was the saltwater cleanse. What CT should have been more focused on is closing the attorney model loophole.
All this does is create $5/6k in revenue per company for the state, it does not protect consumers at all but rather creates an environment where bankruptcy is the ONLY option. Shame on ya CT, you handed the banks a victory and the consumers of Connecticut a loss. Bank lobbyists must have deep pockets in Connecticut.
In a way it does close the loophole. Non-CT licensed attorneys would not be automatically exempt since they are not licensed in the state and CT attorneys would most likely have to show the practice of settling was part of their normal course of business. At the very least you would think it would generate a needed list for CT on who is offering DS services in the state.
It’s not a matter of hiding or not wanting to be on the list; there are are not too many companies willing to pay $5/6k to be on that list.
It comes down to affordability…..between the cost of the bond/licensing fee and the 10% of savings fee cap, a company would need to enroll at least 25 clients each year just to break even on the licensing costs. And that doesn’t include marketing or operation costs.
That why the key to survival is about screening for the right client and total focus on delivery and customer satisfaction.
There is no argument to non-compliance and CT didn’t put up a new barrier, just enforced the current regulations.
Well, either way the consumer has less options because someone has arbitrarily decided to cap pricing on the service. For all of us we realize most providers won’t offer their services in the state which will lead to less choices for the consumer.
Are you saying CT has a fee cap?
I’m not sure if it has a fee cap… “A huge loss for consumers” said 10% savings fee
Schedule of Maximum Fees
The following are the maximum fees that debt negotiators may charge for their services:
Initial Fee:A debt negotiator of unsecured debt may charge the debtor a reasonable one-time initial or set-up fee in an amount not to exceed fifty dollars ($50).
Service Fees:A debt negotiator of unsecured debt may charge a monthly service fee not to exceed eight dollars ($8) for each creditor that is listed in the debt negotiation service contract. The total service fee charged to a debtor may not exceed forty dollars ($40) per month.
Aggregate Fees:A debt negotiator of unsecured debt may collect total aggregate fees including the initial fee and service fees, not to exceed ten percent (10% ) of the amount by which the consumer’s debt is reduced as part of each settlement as agreed to in the debt negotiation service contract as each settlement is achieved. A debt negotiator may not charge more than ten percent (10%) of the amount by which the consumer’s debt is reduced on the basis that the consumer has entered into a debt negotiation contract for joint obligations of a consumer and a consumer’s spouse or other member of the consumer’s household.
Most states require a $10k to $20k bond, CT requires a $50k bond as well as a $1,600 application fee.
They may just be enforcing current regulations but the extremely high licensing cost and a fee cap of 10% of savings is absolutely a barrier and you cant argue that it limits the consumers choices as evidenced by the list companies currently licensed in CT…not one debt settlement company, not one!!
http://www.ct.gov/dob/cwp/view.asp?a=2233&q=297874&dobNAV_GID=1663
From what I see, everyone on that list is a non profits and they are able to pay for the bond/licensing costs out of the “fair share” that the banks pay them.
Im certainly not justifying non compliance. Im afraid of CT and have not enrolled anyone from the state in years. Not because of the fee cap but because CT regulators see red when they think of debt settlement.
At the end of the day these rules give the consumers 2 choices….Debt Management through a non profit or Bankruptcy.
Non-profits have take a huge hit over the past five years. In fact more CCA returns I’ve looked at are making more and sometimes much more from housing counseling and bankruptcy counseling than they do from DMPs.
CT is a missed opportunity for a smart DS company. All they have to do is register and then the advertising becomes “We are the only ones licensed in CT.”
While I get your point, there is no excuse for not being registered if you want to serve CT consumers. What may be perceived as unfair legislation by CT does not give companies a pass to avoid the law. Even legal model companies have been hit with fines in CT.
If I’m understanding this rule correctly, a CT attorney cannot even defend creditor lawsuits without having a debt license?
I don’t read it that way. If the attorney is licensed as an attorney in CT and engaged in his normal practice and has an attorney client relationship with the CT consumer then it would appear they would be exempt from a debt adjuster license http://www.ct.gov/dob/cwp/view.asp?a=2232&q=297842&dobNAV_GID=1663 and debt negotiation license http://www.ct.gov/dob/cwp/view.asp?a=2232&q=446840
Can someone then please shed some light on the need for the 50K bond and $1,600 licensing fee?
Bond form here. http://www.ct.gov/dob/lib/dob/forms_consumer_credit/dn_unsecured_bond.pdf
The licensing fees for the main office and the branch office applications are the same.
$1600 – Application filed between 10/1/2011 and 9/30/2012
$800 – Application filed between 10/1/2012 and 9/30/2013
See http://www.ct.gov/dob/cwp/view.asp?a=2232&q=446840
Who does not need a license:
Any attorney admitted to the practice of law in this state, when
engaged in such practice.
Any bank, fiduciary or financing or lending institution
authorized to transact business in this state or any other state, which performs
debt adjustment in the regular course of its principal business.
Any title insurance or abstract company authorized to transact
business in this state or any other state, while doing an escrow
business.
Any person acting pursuant to any law of this state or of the
United States or acting under the order of a court.