How Connecticut Lending Laws Affect Borrowing

In addition to various federal agencies, the Connecticut Department of Banking enforces numerous laws about lending. They affect interest rates, the loan application process and collection practices. Although these rules reduce the availability of high-interest borrowing options, they protect Connecticut residents from scams and unfair lending. They help to ensure that people can safely borrow money to buy homes, businesses, cars and other costly items.

Personal Loans

The Constitution State maintains relatively strict rules about small loans. Lenders must obtain licenses before they can charge over 12 percent interest. Depending on the specific type of loan, maximum rates range from 17 to 20 percent. Financial institutions can't treat wages as collateral, according to the state government. These rules ensure that Connecticut residents are more likely to obtain loans from banks and credit unions than payday lenders or cash advance services.

Collections

When people can't repay loans, Connecticut and federal law bars debt collectors from using unfair or deceptive techniques. For example, the rules don't permit collectors to call debtors between 9:00 pm and 8:00 am without consent. They assert that collection agency employees can't misrepresent themselves as government officials or lawyers. Furthermore, collectors must prove a debt exists if they want to collect it. The Department of Banking handles questions and complaints from the public.

Home Mortgages

Connecticut law requires most mortgage brokers and lenders to acquire state licenses. It also prevents scam operators from charging non-refundable fees to people who want to apply for mortgages or loan modifications. The law only allows banks or brokers to receive non-refundable fees in advance if they sign separate agreements with borrowers that authorize these charges.

Student Loans

The state legislature passed a Student Loan Bill of Rights in July 2015. This bill improves loan education while making it easier to file complaints or refinance, according to WTNH-TV. The law also promotes ethical practices and asserts that lenders must be registered with the state government before they issue educational loans. Some rules won't go into effect until 2016.

While the existence of these laws protects the public in many situations, some unlicensed lenders continue to promote loans that don't comply with state regulations. The lack of credit score qualifications appeals to some borrowers, but interest rates are usually quite high. When people look for a loan Milford or New Haven, they're much less likely to suffer the effects of illegal lending if they learn the above-mentioned rules and take the time to find licensed, reputable lenders.