CT HB05409

Establishes licensing requirements for debt settlement providers operating in Connecticut, requiring applicants to file with the Banking Commissioner and pay a $1,600 application fee, with licenses expiring on September 30 of odd-numbered years.

Requires debt settlement providers to obtain surety bonds (up to $40,000 or twice monthly payments received), irrevocable letters of credit, or $250,000 insurance policies to protect consumers.

Imposes strict fee caps: initial setup fees capped at the lesser of $400 or 4% of total debt, plus $10 monthly per creditor, with total aggregate fees not exceeding 17-20% of principal debt depending on fee structure.

Mandates comprehensive disclosures to debtors before service agreements, including written financial analysis, explanation of risks (credit rating impact, tax consequences, litigation risks), and confirmation that provider cannot guarantee specific results.

Prohibits numerous deceptive practices including settling debts for more than 50% without creditor assent, making false representations, lending money to debtors, operating as collection agents simultaneously, and falsely claiming nonprofit status.

Establishes criminal penalties of up to $1,000 fine and one year imprisonment for operating without a license, with enhanced penalties for subsequent violations.