State Attorney General Richard Blumenthal announced legal action against credit rating agencies for alleged deceptive and unfair practices that have cost taxpayers millions of dollars.
The lawsuit is against the three largest credit-rating firms in the country, Moody's Investors Service, Standard & Poor's and Fitch Ratings.
Blumenthal says that the core of the problem is a dual rating system used by the agencies that underrates the credit worthiness of municipal debt, compared to corporate debt.
Blumenthal called it a "secret tax imposed by wall street on Main street." He says it's effect is costing taxpayers Billions of dollars in insurance premiums and interest rates that inflate the cost of borrowing by American Towns and cities.
"We demand that the credit rating agencies stop the dual rating system, pay money back to towns and cities, and acknowledge that they have unfairly and deceptively imposed this system through penalties that we will ask them to pay."
Mayors from several towns and cities joined Blumenthal to talk about the lawsuit. Waterbury Mayor Michael Jarjura says his city has paid hundreds of thousands of dollars in fees based on ratings they received from the agencies.
"When we're trying to squeeze every value of every penny for the tax payers, to now know that we've probably paid in excess of hundreds of thousands if not millions that we didn't have to pay is very disturbing."
Blumenthal says the agencies have been using the dual rating system for at least a decade or more.
Fitch and Standard & Poor's refuted the allegations saying the suit is without merit and they intend to defend themselves vigorously. Calls for comment to Moody's were not returned.