OLR Bill Analysis

sSB 934 (File 187, as amended by Senate "B")*

AN ACT CONCERNING USE OF CONSUMER COLLECTION AGENCIES FOR MUNICIPAL PROPERTY TAX COLLECTION

SUMMARY:

This bill allows consumer collection agencies to receive for payment, as well as collect, municipal property tax from a tax debtor on the municipality's behalf. Current law prohibits them from receiving the tax.

The bill requires consumer collection agencies receiving property tax on a municipality's behalf to have an insurance policy of at least $ 2 million from an insurer authorized to do business in Connecticut, providing coverage against loss of money, securities, or other property, including loss arising from any employee, officer, or director's fraudulent or dishonest act. It specifies that the municipality is responsible for ensuring the agency's compliance with this provision.

The bill permits a municipality that enters into an agreement with an agency also to require the agency to file with it a bond, in a form the municipality approves and in a sum up to the total amount of property tax the municipality has requested the agency to collect. The bond must (1) be written by a surety authorized to write bonds in Connecticut; (2) contain a provision requiring the surety to give the municipality written notice of the bond's cancellation and directing him to send the notice by certified mail to the municipality at least 30 days before the cancellation date; and (3) require the collection agency well, truly, and faithfully to account for all funds it collects and receives. If a municipality is injured by an agency's wrongful conversion of any property taxes it receives, the bill allows the municipality to proceed on the bond against the principal, surety, or both to recover damages. It specifies that the bond proceeds, even if commingled with the agency's other assets, are deemed to be held in trust for the municipality's benefit in the event of the agency's bankruptcy and are immune from attachment by creditors and judgment creditors.

*Senate Amendment "B" replaces a requirement from the original bill that consumer collection agencies receiving property taxes file a bond with the commissioner and have commercial crime insurance with a broader requirement for insurance coverage against loss. It allows a municipality to approve the form of the bond the agency files with it, requires the bond to be written by a surety authorized to write bonds in Connecticut, and requires a bond provision directing the surety to notify the municipality of the bond's cancellation. The amendment provides that the bond proceeds will be held in trust for the municipality's benefit in the event of the agency's bankruptcy.

EFFECTIVE DATE: Upon passage

BACKGROUND

Legislative History

On April 15, the Senate referred the bill to the Planning and Development Committee, which reported it favorably and without change on April 23. On April 30, the Senate referred the bill to the Insurance Committee, which reported it favorably and without change on May 8. On May 27, the Senate referred the bill to the Finance, Revenue and Bonding Committee, which reported it favorably and without change on May 29.

COMMITTEE ACTION

Banks Committee

Joint Favorable Substitute

Planning and Development Committee

Joint Favorable Report

Insurance and Real Estate Committee

Joint Favorable Report

Finance, Revenue and Bonding Committee

Joint Favorable Report