After the 2008 economic crash, business boomed for companies that promised consumers help in addressing credit card debt. But it turns out some debt negotiation firms were much better at collecting fees than solving debtors’ problems. In response, the Connecticut Legislature in 2009 approved stronger Banking Department regulations to prevent predatory practices.
Debt-reduction companies were limited to a $50 initial fee, couldn’t take more than 10 percent of the debt actually reduced, and needed to have a license costing $800 a year. But there was a lawyer exemption from those rules. And so some debt settlement companies took on the shape of law firms.
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