Connecticut attorney general
CT Bans Upfront Fees, Limits Fees to $500
September 29, 2009 by admin · Leave a Comment
September 28, 2009
Connecticut State Banking Commissioner Howard Pitkin today issued a schedule of the maximum fees that a debt negotiator may charge for specific services pursuant to section 32(b) of Public Act 09-208. The legislation, An Act Concerning Consumer Credit Licensees, makes a number of changes regarding consumer credit licensees.
The act expands upon the definition of a licensed debt adjuster to include for-profit entities. It defines debt negotiation, which includes debt settlement, foreclosure rescue, and short sales, and creates a new license for debt negotiators that tracks the same licensing requirements as debt adjusters with regard to application procedures, requirements, and enforcement. The act also imposes additional consumer protection requirements upon all debt adjusters.
“In preparation for this law taking effect, the agency has put together this release to inform the industry of their new responsibilities,” commented Commissioner Pitkin. “It is important to note that as of October 1, it will be a violation of state law to provide certain debt negotiation services, including debt settlement, loan modifications and foreclosure rescue, without a license.”
Information and applications for companies seeking to obtain the debt negotiation license is available on the Department of Banking’s website, at www.ct.gov/dob, or by calling the Consumer Credit Division, at 860-240-8200, or toll-free 1-800-831-7225.
Additionally, if you are a Connecticut resident that is dealing with a debt adjuster or debt negotiator, please contact the Department of Banking to find out if the company or individual is licensed.
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.
DEBT NEGOTIATORS OF SECURED DEBT
A debt negotiator of secured debt, including Short Sales and Foreclosure Rescue Services, may impose a fee upon the mortgagor or debtor for performing debt negotiation services not to exceed five hundred dollars ($500). Such fee shall only be collectable upon the successful completion of all services stated in the debt negotiation service contract. Nothing herein shall prohibit any person from receiving compensation from the mortgagee or its assignees.
“I am hopeful that this information will prove useful to the industry and the citizens of Connecticut,” concluded Commissioner Pitkin. “If you have any additional questions related to this new law, please contact the Department of Banking at 1-800-831-7225 and we will do our best to assist you.”
Connecticut attorney general
CT & FL AG Targets 2 Mod Companies Claiming Partnership With Law Firms
August 23, 2009 by admin · Leave a Comment
Diane Lade of the South Florida Sun-Sentinel wrote an article about how the Connecticut and Florida AG’s offices are investigating First Legal/Nationwide Home Relief. The Florida AG is investigating both First Legal/Nationwide Home Relief and Housing Assistance Law Center.
The Florida Bar posted an advisory back in March advising attorneys what they can and cannot do when doing business with modification companies:
ETHICS ALERT:
PROVIDING LEGAL SERVICES TO DISTRESSED HOMEOWNERS
The Florida Bar’s Ethics Hotline recently has received numerous calls from lawyers who have been contacted by non-lawyers seeking to set up an arrangement in which the lawyers are involved in loan modifications, short sales, and other foreclosure-related rescue services on behalf of distressed homeowners. These non-lawyers include mortgage brokers, financial management advisors, foreclosure “consultants” and others who engage in foreclosure related rescue services or other similar services. Non-lawyers have proposed a variety of agreements, even offering to hire lawyers as “in-house counsel” to provide services to the non-lawyer’s customers. The Foreclosure Rescue Act, Section 501.1377, Florida Statutes, went into effect October 1, 2008 and imposed restrictions on non-lawyer loan modifiers to protect distressed homeowners. The new statute appears to be the impetus for these inquiries.
Lawyers should be wary of these proposals, as many violate the ethics rules and may subject the lawyer to discipline. Florida Bar members:
- Cannot pay a referral fee or give anything of value to a non-lawyer for referring distressed homeowners to the lawyer. [Rule 4-7.2(c)(14)]
- Cannot be paid by a non-lawyer to provide services to distressed homeowners. [Rule 4-5.4(a)]
- Cannot directly or indirectly divide fees with a non-lawyer. [Rule 4-5.5(a)]
Cannot assist in the unauthorized practice of law by:
- providing legal services for a distressed homeowner while employed as in-house counsel for a non-lawyer company;
- forming a company with a non-lawyer to perform foreclosure related services if any of the services are the practice of law; or
- assisting a non-lawyer individual or company in providing services that the individual or company is not authorized to provide or are otherwise illegal.
[Rule 4-5.5(a)]
- Cannot assist a non-lawyer in violating the provisions of the Foreclosure Rescue Act, Section 501.1377, Florida Statutes. [Rule 4-8.4(d)]
- Cannot directly contact distressed homeowners to offer representation (including by telephone or facsimile) and cannot allow someone else to directly contact distressed homeowners on the lawyer’s behalf. [Rules 4-7.4(a) and 4-8.4(a)]
- Cannot accept referrals from non-lawyers acting in the guise of a “lawyer referral service” (legitimate lawyer referral services must comply with a rule which requires all advertisements and contact with prospective clients to be in compliance with the attorney advertising rules, in addition to other requirements) [Rule 4-7.10]
- Must have a direct relationship with distressed homeowners who hire the lawyer for representation. [Rules 4-1.1, 4-1.2 and 4-1.4]
- Cannot allow a non-lawyer to choose a lawyer for a distressed homeowner or direct a lawyer’s representation of a distressed homeowner. [Rules 4-1.1, 4-1.2, 4-1.4, and 4-5.5(a)]
Several ethics opinions, Opinions 92-3 and 95-1 in particular, discuss similar proposals and the ethics problems that arise when lawyers enter business arrangements with non-attorneys. These opinions can be accessed on the Florida Bar’s website by selecting “ethics opinions” then “list of Florida Ethics Opinions by number.”
This alert does not address every potential problem or concern. Lawyers should not assume that conduct is permissible merely because it is not listed above. If you are a Florida Bar member with specific questions about your own conduct related to this type of situation, you should contact The Florida Bar Ethics Hotline at (800) 235-8619.
This alert also does not address the issue of what conduct by non-lawyers is permissible. Questions regarding whether conduct of non-lawyers constitutes the unlicensed practice of law should be directed to The Florida Bar Unlicensed Practice of Law Department at (850) 561-584
