CT Gen Stat § 36a-671d (2020)
2020 Connecticut General Statutes|Title 36a - The Banking Law of Connecticut|Chapter 669 - Regulated Activities|Section 36a-671d - Surety bond required. Form of surety bond. Cancellation of bond. Automatic suspension of license. Notice. Opportunity for hearing. Determination of penal sum. Aggregate amount of residential loans.

 (a)(1) No debt negotiation license, and no renewal thereof, shall be granted unless the applicant has filed the surety bond required by this section, which bond shall be written by a surety authorized to write such bonds in this state.(2) No application for a debt negotiation license for a main office, and no renewal of such a license, shall be granted unless the applicant has filed a single surety bond with the commissioner in an aggregate amount of fifty thousand dollars, or such other amount required by subdivision (4) of this subsection. No application for a debt negotiation license branch office, and no renewal of such a license, shall be granted unless the applicant has identified such branch office as a bonded location by addendum to the main office surety bond required by this section.(3) Each debt negotiation licensee shall file a single surety bond that complies with the requirements of this section in connection with the main office license with the commissioner in an aggregate amount of fifty thousand dollars or such other amount required in subdivision (4) of this subsection, which bond shall identify any licensed branch office as a bonded location on such bond by addendum.(4) In the case of a debt negotiation licensee engaging or offering to engage in the business of negotiating residential mortgage loans on behalf of mortgagors, such debt negotiation licensee shall file a bond in the penal sum amount set forth in subsection (e) of this section based on the aggregate dollar amount of the residential mortgage loans negotiated or offered to be negotiated by its sponsored mortgage loan originator licensees. The principal on a bond required by this subdivision shall file quarterly reports on the system reflecting residential mortgage loan volume in accordance with subsection (g) of this section and subsection (m) of section 36a-671 to confirm that it maintains the required penal sum in the amount required by this subdivision.(5) Each debt negotiation licensee shall file with the commissioner such information as the commissioner may require to confirm that the penal sum of the bond remains consistent with the amount required by this section. The principal shall file, as the commissioner may require, any bond rider or endorsement to the surety bond on file with the commissioner to reflect any changes necessary to maintain the surety bond coverage required by this section.(b) The form of any surety bond submitted pursuant to subsection (a) of this section shall be approved by the Attorney General. Any surety bond filed under subsection (a) of this section shall be conditioned upon the debt negotiation licensee and any sponsored mortgage loan originator licensee faithfully performing any and all written agreements or commitments with or for the benefit of debtors and mortgagors, as applicable, truly and faithfully accounting for all funds received from a debtor or mortgagor by the principal or a mortgage loan originator sponsored by the principal in the principal's capacity as debt negotiation licensee, and conducting such business consistent with the provisions of sections 36a-485 to 36a-498e, inclusive, 36a-534a, 36a-534b and 36a-671 to 36a-671f, inclusive. Any debtor or mortgagor who may be damaged by a failure to perform any written agreements, by the wrongful conversion of funds paid by a debtor or mortgagor to a debt negotiation licensee or mortgage loan originator licensee, or by conduct inconsistent with the provisions of sections 36a-485 to 36a-498e, inclusive, 36a-534a, 36a-534b and 36a-671 to 36a-671f, inclusive, may proceed on any such surety bond against the principal or surety thereon, or both, to recover damages. The commissioner may proceed on any such surety bond against the principal or surety thereon, or both, to collect any civil penalty imposed upon the licensee pursuant to subsection (a) of section 36a-50 and any unpaid costs of examination of a licensee as determined pursuant to section 36a-65 and effective April 1, 2019, any restitution imposed pursuant to subsection (c) of section 36a-50. The proceeds of any bond, even if commingled with other assets of the principal, shall be deemed by operation of law to be held in trust for the benefit of such claimants against the principal in the event of bankruptcy of the principal and shall be immune from attachment by creditors and judgment creditors. Any bond required by this section shall be maintained during the entire period of the license granted to the applicant, and the aggregate liability under any such bond shall not exceed the penal amount of the bond. The principal shall notify the commissioner of the commencement of an action on the bond. When an action is commenced on a principal's bond, the commissioner may require the filing of a new bond and immediately on recovery on any action on the bond, the principal shall file a new bond. Any mortgagor or prospective mortgagor who may be damaged by a failure of the debt negotiation licensee or mortgage loan originator licensee to satisfy a judgment against the licensee arising from the negotiation of or offer to negotiate a nonprime home loan, as defined in section 36a-760, may proceed on such bond against the principal or surety on such bond, or both, to recover the amount of the judgment.(c) The surety shall have the right to cancel any bond written or issued under subsection (a) of this section at any time by a written notice to the debt negotiation licensee and the commissioner stating the date cancellation shall take effect. If such bond is issued electronically on the system, written notice of cancellation may be provided by the surety to the licensee and the commissioner through the system at least thirty days prior to the date of cancellation. Any notice of cancellation not provided through the system shall be sent by certified mail to the licensee and the commissioner at least thirty days prior to the date of cancellation. No such bond shall be cancelled unless the surety notifies the commissioner in writing not less than thirty days prior to the effective date of cancellation. After receipt of such notification from the surety, the commissioner shall give written notice to the debt negotiation licensee of the date such bond cancellation shall take effect. The commissioner shall automatically suspend the licenses of the debt negotiation licensee on such date and inactivate the license of any sponsored mortgage loan originator, unless prior to such date the debt negotiation licensee submits a letter of reinstatement of the bond from the surety or a new bond, surrenders all licenses or, in the case of a mortgage loan originator sponsored by a debt negotiation licensee, the sponsorship has been terminated and a new sponsor has been requested and approved. After a license has been automatically suspended, the commissioner shall (1) give the debt negotiation licensee notice of the automatic suspension pending proceedings for revocation or refusal to renew and an opportunity for a hearing on such actions in accordance with section 36a-51, and (2) require the debt negotiation licensee to take or refrain from taking such action as the commissioner deems necessary to effectuate the purposes of this section.(d) No licensee shall use, attempt to use or make reference to, either directly or indirectly, any word or phrase that states or implies that the licensee is endorsed, sponsored, recommended, bonded or insured by the state.(e) The penal sum of the bond required by subdivision (4) of subsection (a) of this section shall be determined as follows:(1) An initial applicant for a debt negotiation license shall file a bond in a penal sum of fifty thousand dollars.(2) A debt negotiation licensee exempt from licensure as a mortgage lender, mortgage correspondent lender or mortgage broker pursuant to subdivision (4) of subsection (a) of section 36a-487 and sponsoring and bonding at least one mortgage loan originator as an exempt registrant under subdivision (2) of subsection (a) and subsection (d) of section 36a-487 shall file a bond with a penal sum in the following amount:(A) If the aggregate dollar amount of all residential mortgage loans negotiated or offered to be negotiated by all sponsored mortgage loan originators during the preceding twelve-month period ending July thirty-first of the current year is less than thirty million dollars, the penal sum of the bond shall be fifty thousand dollars;(B) If the aggregate dollar amount of all residential mortgage loans negotiated or offered to be negotiated by all sponsored mortgage loan originators during the preceding twelve-month period ending July thirty-first of the current year is thirty million dollars or more but less than fifty million dollars, the penal sum of the bond shall be one hundred thousand dollars; and(C) If the aggregate dollar amount of all residential mortgage loans negotiated or offered to be negotiated by all sponsored mortgage loan originators during the preceding twelve-month period ending July thirty-first of the current year is fifty million dollars or more, the penal sum of the bond shall be one hundred fifty thousand dollars.(f) For purposes of subsection (e) of this section, “the aggregate dollar amount of all residential mortgage loans negotiated or offered to be negotiated” means the aggregate underlying dollar amount of all residential mortgage loans for which a sponsored mortgage loan originator provides debt negotiation services.(g) Financial information necessary to verify the aggregate amount of residential mortgage loans negotiated or offered to be negotiated shall be filed with the commissioner as the commissioner may require, and shall be reported on the system at such time and in such form as the system may require. The commissioner may require a change in the penal sum of the bond if the commissioner determines at any time that the aggregate dollar amount of all residential mortgage loans negotiated or offered to be negotiated warrants a change in the penal sum of the bond.(h) The commissioner may adopt regulations in accordance with chapter 54 with respect to the requirements for such surety bonds.(P.A. 09-208, S. 30; P.A. 11-216, S. 44; P.A. 14-7, S. 3, 4; 14-122, S. 161; P.A. 18-173, S. 69.)History: P.A. 11-216 amended Subsec. (a) to make a conforming change in Subdiv. (1) and add new Subdivs. (2) to (4) re surety bond requirements, redesignated existing Subsec. (a)(2) as Subsec. (b) and amended same to add references to debt negotiation and sponsored mortgage loan originator licensees, require a true and faithful accounting for all funds received from a debtor or mortgagor, add references to Secs. 36a-485 to 36a-498f, 36a-534a and 36a-534b, to permit debtor or mortgagor damaged by wrongful conversion of funds paid by a debtor or mortgagor to a debt negotiation or mortgage loan originator licensee to proceed on surety bond to recover damages, to permit commissioner to collect unpaid costs of examination of a licensee, to require principal to notify commissioner of commencement of action on the bond, to permit commissioner to require filing of a new bond when action is commenced, to permit any negotiator or prospective mortgagor damaged by failure to satisfy a judgment to proceed on surety to recover amount of judgment and to make conforming changes, redesignated existing Subsec. (b) as Subsec. (c) and amended same to add references to debt negotiation and mortgage loan originator licensees and make conforming changes, redesignated existing Subsec. (c) as Subsec. (d), and added Subsec. (e) re penal sum of bond, Subsec. (f) re aggregate dollar amount of all residential mortgage loans negotiated or offered to be negotiated, Subsec. (g) re financial information required to verify aggregate amount and Subsec. (h) re regulations; P.A. 14-7 amended Subsec. (a)(4) to replace reference to Subsec. (f) with reference to Subsec. (e) and replace reference to Subsec. (h) with reference to Subsec. (g), amended Subsec. (b) to replace references to Sec. 36a-671d with references to Sec. 36a-671e and amended Subsec. (e)(2) to replace reference to Sec. 36a-487(c) with reference to Sec. 36a-487(d), effective May 8, 2014; P.A. 14-122 made a technical change in Subsec. (f); P.A. 18-173 amended Subsec. (a) by replacing provision re principal on bond to confirm annually that it maintains required penal sum with provision re principal on bond to file quarterly reports on the system to confirm it maintains required penal sum, designating existing provisions re licensee to file information with commissioner as Subdiv. (5) and amending same by deleting reference to September 1, 2012 and each September first thereafter, and deleting reference to Subsec. (g), amended Subsec. (b) by replacing references to Sec. 36a-498f with references to Sec. 36a-498e, replacing references to Sec. 36a-671e with references to Sec. 36a-671f, and adding “and effective April 1, 2019, any restitution imposed pursuant to subsection (c) of section 36a-50”, amended Subsec. (c) by adding references to commissioner, adding provision re notice of cancellation if bond issued electronically, designating existing provisions re notice of automatic suspension as Subdiv. (1), designating existing provisions re commissioner's authority to require licensee to take or refrain from taking action as Subdiv. (2), and amending same to replace “action as, in the opinion of the commissioner, will effectuate the purposes of this section” with “action as the commissioner deems necessary to effectuate the purposes of this section”, amended Subsec. (e)(2) by adding provision re exemption from licensure as mortgage lender, mortgage correspondent lender or mortgage broker, and amended Subsec. (g) by deleting reference to Sec. 36a-485, and made technical and conforming changes.