Excess Foreclosure Proceeds Limit Finder's Fees

The act limits the premium, sometimes known as a 'finder's fee', that a person may charge for offering assistance in recovering the balance of the purchase price of foreclosed property after all liens and claims against the property have been satisfied. Under current law, the public trustee must hold this balance, if any, for the benefit of the former owner of the property for up to 5 years, and then transfer it to the state treasurer for administration under the 'Unclaimed Property Act'.

The act reduces the period during which the public trustee must hold these funds from 5 years to 6 months. It also voids any contract for payment of a finder's fee during the public trustee's custody of the funds and during the first 2 years of the state treasurer's custody of the funds, and caps the finder's fee at 20% of the amount recovered once these periods expire. For amounts that have been in the custody of the state treasurer for 3 years or more, the finder's fee may be up to 30%.

Additional requirements are imposed on the finder's contract, including the requirements that the contract:

• Is signed by the person to whom the amounts are due;
• Contains a description of the property and the date of the foreclosure sale; and
• Describes the nature of the services that the finder will perform.

Inducing, or attempting to induce, a person to enter into a contract that violates these requirements is punishable as a misdemeanor with penalties of up to 6 months in jail, a fine of up to $10,000, or both, and is designated as a deceptive trade practice under the 'Colorado Consumer Protection Act'.

(Note: This summary applies to this bill as enacted.)