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For Immediate Release
March 25, 2005
Media Contact:
Kevin Enright 410-576-6357

ATTORNEY GENERAL SETTLES WITH COMPANY THAT SOLD SURETY BONDS TO RENTERS

UPDATE: During the 2006 session, the General Assembly passed Ch. 502, Laws of Maryland 2006, which regulates the sale of surety bonds in lieu of a security deposit, including providing rights and remedies that are similar in many respects to those afforded under the Security Deposit Statute, § 8-203 of the Real Property Article. Converge Services, Inc. d/b/a SureDeposit is permitted to sell surety bonds in accordance with the statutory framework created by Ch. 502, Laws of Maryland 2006. To read the statute click on the following link: http://mlis.state.md.us/2006rs/billfile/hb1620.htm


Attorney General J. Joseph Curran, Jr. announced today that his Consumer Protection Division has entered into a settlement with Converge Services Group, L.L.C. (doing business as "SureDeposit"), of 14 Main Street, Madison, N.J. and its owners, Stuart Litwin and Daniel Rudd. The settlement resolves allegations that the company engaged in unfair and deceptive trade practices in connection with their selling surety bonds to Maryland renters.

SureDeposit, through several landlords, sold surety bonds to Maryland tenants applying to rent apartments, at the cost of a $175 or higher nonrefundable premium. The surety bonds served the same purpose as a security deposit – to protect landlords against damages to the rental premises or damages due to breach of lease. At the conclusion of the tenancy, SureDeposit paid landlords for any damages the landlords claimed were caused by tenants (i.e., lost rent or damage to the property), and then sought to recover its payments from the tenants. The Division estimates that more than 1,050 Marylanders purchased SureDeposit surety bonds.

The Maryland Security Deposit Law permits landlords to collect security deposits from their tenants from which they may deduct amounts for lost rent, damage due to breach of lease and damages in excess of ordinary wear and tear. However, the amounts collected must be returned to tenants at the conclusion of their tenancies, less any deductions lawfully made for damages. The Division alleged that SureDeposit violated the Consumer Protection Act because the premiums collected by SureDeposit for its surety bonds were nonrefundable and because the tenants who purchased the surety bonds were not advised of the rights and protections to which they would be entitled under the Security Deposit Law. The Division also alleged that SureDeposit did not adequately disclose to consumers who purchased its surety bonds that they would remain liable for damages to the rental premises, that SureDeposit would reimburse landlords for claims that could not be paid under the Security Deposit Law, and that SureDeposit did not notify the consumer of claims being made by the landlord. SureDeposit denies it violated the Consumer Protection Act.

Under the settlement agreement, SureDeposit promised to stop engaging in the practices that had been alleged. SureDeposit will pay restitution of all money it received from Maryland consumers. SureDeposit also agreed to pay the Division an additional $15,000 for its costs. The landlords through which SureDeposit offered its surety bond product products have agreed to hold the premiums being refunded to current tenants in accordance with the Security Deposit Law.

"When consumers rent apartments, they must be advised of all of their rights," said Curran. "Tenants should be able to enjoy all of the rights and protections provided under the Security Deposit Law."
 

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