Raised Bill No. 5907
January Session, 2009
LCO No. 2459
Referred to Committee on Banks
AN ACT CONCERNING FORECLOSURE RESCUE AND DEBT REDUCERS.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. Section 36a-700 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2009):
(a) As used in this section: [, "credit]
(1) (A) "Credit clinic" means any person who sells, provides or performs, or who represents that such person can or will sell, provide or perform, a service for the express or implied purpose of correcting, changing or deleting adverse entries on a consumer's credit record, history or rating, [or] providing advice or assistance to a consumer with regard to correcting, changing or deleting adverse entries on a consumer's credit record, history or rating in return for the payment of a fee; [. "Credit] and (B)"credit clinic" does not include: [(1)] (A) Credit rating agencies as defined in section 36a-695; [(2)] (B) any person licensed to practice law in this state provided such person renders services [as a credit clinic, as defined in this subsection] described in subparagraph (A) of this subdivision, within the course and scope of his practice as an attorney; or [(3)] (C) any organization [which] that is exempt from taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, [as from time to time amended] as amended from time to time;
(2) "Debt reduction service" means the selling, provision or performance of, or the representation that a person can sell, provide or perform, a service for the express or implied purpose of reducing or eliminating a consumer's debt or reducing the interest rate charges on such debt, and includes foreclosure rescue services except when such services are performed by (A) any bank or credit union licensed or chartered by the federal government, the state of Connecticut or any other state; (B) any existing creditor of the consumer when such service relates solely to the debt the consumer owes to such creditor; or (C) any debt adjuster licensed pursuant to sections 36a-655 to 36a-665, inclusive, when performing debt adjustment services under such license;
(3) "Foreclosure rescue services" means services related to or promising assistance in connection with (A) avoiding or delaying actual or anticipated foreclosure proceedings concerning residential property, or (B) curing or otherwise addressing a default or failure to timely pay with respect to a residential mortgage loan obligation and includes, but is not limited to, the offer, arrangement or placement of a residential mortgage loan or other loan when those goods or services are advertised, offered or promoted in the context of foreclosure-related services.
(b) A credit clinic shall provide to each purchaser of the services of a credit clinic a contract which contract shall include, in bold face type a minimum size of ten points, the following statements:
RIGHT TO REVIEW YOUR FILE
The federal Fair Credit Reporting Act gives you the right to know what your credit file contains, and the credit rating agency must provide someone to help you to interpret the data. Sections 36a-695 to 36a-699, inclusive, of the Connecticut general statutes [gives] give you the right to receive an actual copy of your credit report. You will be required to identify yourself to the credit rating agency and you may be charged a small fee. There is no fee, however, if you are seeking a credit report for the first time in twelve months or have been turned down for credit, employment or insurance because of information contained in a report within the preceding thirty days.
If you notify the credit rating agency that you dispute the accuracy of information, the agency must reinvestigate and modify or remove inaccurate data. The credit rating agency may not charge any fee for this investigation or for modifying or removing inaccurate data. If reinvestigation does not resolve the dispute, you may enter a statement of one hundred words or less in your file [,] explaining why you dispute the accuracy of your record or file. This statement, or a coded version of it, must be included with all reports [which] that the credit rating agency issues on you. If the error is corrected, the credit rating agency must notify any person who requested a report on you during the previous two years for employment purposes and the previous six months for any other purpose.
TIME LIMITS ON ADVERSE DATA
Most kinds of information in your file may be reported for a period of seven years. If you have declared personal bankruptcy, however, that fact may be reported for ten years. After seven or ten years, the information cannot be disclosed by a credit rating agency unless you are being investigated for a credit application of fifty thousand dollars or more, for an application to purchase life insurance of fifty thousand dollars or more, or for employment at an annual salary of twenty thousand dollars or more.
(c) In addition to statements required in subsection (b) of this section with regard to a credit clinic, each contract for a credit clinic or a debt reduction service shall contain a complete, detailed list of services to be performed, [by the credit clinic] the costs of such services and the results to be achieved. [by the credit clinic.] A copy of the consumer's current credit report shall be attached to the contract with the adverse entries to be modified clearly marked. Each debt reduction service contract shall contain (1) a statement certifying that the person offering debt reduction services has reviewed the consumer's debt, and (2) an individualized evaluation of the likelihood that the proposed debt reduction services would reduce the consumer's debt or debt service or, if appropriate, prevent the consumer's residential home from being foreclosed. Each contract shall allow the consumer to cancel or rescind such contract during the three-day period after the date on which the consumer signed the contract. Such contract shall contain a clear and conspicuous caption that shall read, "Buyer’s three-day right to cancel", along with the following statement: "If you wish to cancel this contract, you may cancel by mailing a written notice by certified or registered mail to the address specified below. The notice shall state that you do not wish to be bound by this contract and must be delivered or mailed before midnight of the third business day after you sign this contract.".
(d) Any contract [which] that does not comply with the provisions of subsections (b), [and] (c) and (e) of this section shall be void and the credit clinic or debt adjustor shall return to the consumer any payments made by the consumer [to the credit clinic] under the voided contract.
(e) No credit clinic or person offering debt reduction services may charge a fee or receive any money or other valuable consideration for the performance of any service the credit clinic or person offering debt reduction services has agreed to perform for any consumer until the credit clinic or person offering debt reduction services has fully performed such service. No person may sell, provide, perform or represent that such person can or will sell, provide or perform a debt reduction service unless such person is an organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986 or any subsequent corresponding internal revenue code of the United States, as amended from time to time.
(f) The Banking Commissioner may review any fees or charges assessed by the credit clinic or the person offering debt reduction services and order the reduction of such fees or charges or repayment of such amount of the fees or charges that the commissioner deems excessive, taking into consideration the fees that other credit clinics or other persons performing similar debt reduction services charge for such services and the financial benefit to the consumer of such services. In conducting an investigation pursuant to this subsection, the commissioner shall have the same authority as specified in section 36a-17.
(g) The provisions of this section shall apply to any credit clinic or debt reduction service contract if the consumer signing the contract is a resident of this state or maintains a domicile in this state and such consumer negotiates or agrees to the terms of the services contract in person, by mail, by telephone or via the Internet while physically present in this state.
[(f)] (h) A violation of any provision of this section shall be deemed an unfair or deceptive trade practice pursuant to section 42-110b.
This act shall take effect as follows and shall amend the following sections:
July 1, 2009
Statement of Purpose:
To require individuals selling debt reduction services to (1) clearly describe in a contract the services to be provided, including an analysis of the consumer's debt; (2) provide consumers with a three-day right of cancellation; and (3) document all costs associated with the provision of debt reduction services to prohibit debt reducers from charging upfront or advance fees, to prohibit for-profit corporations from providing debt reduction services and to authorize the Banking Commissioner to investigate and reduce debt reducer fees that are excessive in relation to common industry fees and the financial benefit received by the consumer for such services.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]