Understanding Collection Agency Licensing Requirements - January 2020January 2020

Who Needs a Collection Agency License?

In the state of Washington, the following entities are required to be licensed as a collection agency:

• Third-party debt collectors
• Businesses that purchase debt (delinquent or already charged off) for the purpose of collecting it for a profit
• Individuals using a fictitious name to collect their own debt

It is illegal to operate as a debt collector without being properly licensed.

What Does the Licensing Process Involve?

While license applications are processed by the Washington Department of Revenue�s Business Licensing Service, the licenses themselves are issued by the Washington State Department of Licensing, referred to as DOL. Here are the steps to get a collection agency license in Washington:

1. Complete the Washington Consumer Collection Agency License Forms available on the DOL website Collection Agencies page. The two forms that must be completed are Business License application and the Collection Agency License Addendum.
2. Prepare or obtain a personal or business financial statement showing your assets and liabilities for one of the past three months and a net worth of at least $7,500�at least $5,000 of which must be in a bank account.
3. Set up a trust account at a federally insured bank.
4. Obtain a collection agency bond in the amount of $5,000 from a surety bond company licensed to do business in Washington.
5. Pay the collection agency license fee (currently $850) and the business license fee (currently $15), and submit the completed application, financial statement, and surety bond for approval.

Why is a Surety Bond Required?

The surety bond serves as your guarantee to operate your debt collection business in accordance with all applicable laws and regulations. It also provides financial protection for anyone who suffers a financial loss suffered as a result of any unlawful or unethical actions on your part.

Understanding How Surety Bonds and Licensing Processes Work

The terms of the surety bond agreement establish what you must do to remain in compliance. If you violate that agreement and someone consequently suffers a financial loss, that person has the right to file a claim against your collection agency bond and receive compensation. When a claim is filed, the surety bond company will investigate promptly to make sure the claim is valid.

As the bonded individual, you are responsible for paying all valid claims against the bond. The surety company may pay a claim initially, as a courtesy to ensure prompt payment to the client while giving you some time to pull together the funds needed to cover the claim. But you are legally obligated to reimburse the surety company for any such advance payments to claimants.

What Does It Cost?

You�ll pay an annual premium that is a small percentage of the required $5,000 bond amount. That percentage is determined by the surety company and based largely on your personal credit score. If your credit is good, you�ll most likely pay a premium rate of between 1% and 3%.

Get Bonded Today

Apply online or call us today to get the surety bond you�ll need to operate a collection agency business in Washington.

Who Needs a Collection Agency License?

North Carolina requires all collection agencies and debt buyers to be licensed at the state level through the North Carolina Department of Insurance (DOI). DOI also regulates and supervises the debt collection industry in North Carolina. Attorneys and law firms, however, do not need to be licensed as collection agencies to engage in debt collection activities.

What Does the Licensing Process Involve?

In North Carolina, new and renewal license applications are submitted online through the North Carolina License Management System (NCMMS). In addition to completing the Collection Agency License application form, you must provide a number of attachments and additional documents, such as:

• A sworn statement describing your collection methods
• A copy of your most recent trust account bank statement used for collection activity
• A certified balance sheet showing that you have a net worth of at least $5,000

All applicants for licensure as a collection agency must also purchase a North Carolina Collection Agency Bondin the appropriate amount:

• $10,000 for applicants domiciled in North Carolina
• $20,000 for applicants domiciled in a state other than North Carolina
• $40,000 for applicants domiciled outside of the United States

These are the bond amounts required when obtaining a new collection agency license. When you renew your license, the DOI will calculate the required bond amount as one-sixth of your total collections minus your earned commissions, with a maximum of $30,000.

The original surety bond must be submitted to the North Carolina DOI in order for your collection agency license application to be considered complete.

Why is a Surety Bond Required?

The purpose of the surety bond is to provide protection for the state and for consumers against financial loss stemming from any unlawful or unethical actions you take in the course of your debt collection activities. The bond serves as your guarantee to conduct business in accordance with all relevant laws and regulations.

Understanding How Surety Bonds and Licensing Processes Work

The surety bond agreement documents what you must do to remain in compliance and avoid claims being filed against the bond. Any violation on your part that causes a financial loss can result in the injured party filing a claim, which you are legally obligated to pay if the claim is determined by the surety bond company to be valid.

Ideally, you will pay any valid claim right away. In reality, the surety company often steps up and pays a claim in advance, on behalf of the bonded individual. This ensures prompt payment of the claim, but it won�t let you off the hook. The legal responsibility for paying any claims against your bond belongs to you, and you alone, so you must reimburse the surety company for such advance payments to claimants.

What Does It Cost?

Surety bond companies charge a premium that is a small percentage of the required bond amount. They set the premium rate on a case-by-case basis. This is the amount you will pay�no the total bond amount. The key factor determining your premium rate is your personal credit score. The higher your credit score, the lower the premium rate you will be assigned. If your credit is great, your premium could be as low as 1%.

Get Bonded Today

You can count on our experienced team to get you the best possible deal on the bond you need in order to obtain or renew your license as a North Carolina collection agency. Apply online or by phone with Single Source Insurance today.

Who Needs a Collection Agency License?

There is no statewide requirement in New York for the licensing of collection agencies, but New York City and the city of Buffalo do require any business that collects personal or household debts to be licensed as a collection agency. That also applies to:

• Businesses that buy consumer debt for collection purposes
• Lawyers and law firms involved in debt collection
• Collection agencies that are not physically located in New York City but whose primary business is to collect debts from people who live in the city

Our focus here is on collection agency licensing in New York City. Be sure to check with the municipalities in which you plan to operate as a debt collector to determine whether there are any local licensing requirements for collection agencies.

What Does the Licensing Process Involve?

In New York City, collection agency licenses are issued by the NYC Department of Consumer Affairs (DCA).� Here are the steps to get a collection agency license in New York City:

1. Complete these forms (available on the NYC Business Licenses and Permits page of the DCA website):

• NYC Collection Agency License application
• NYC Basic Business application
• NYC Child Support form (requires additional supporting documents, including a copy of the contract you sign with clients seeking collection of child support payments)
• Debt collection Agency Non-Resident form (required from applicants residing outside of NYC)

1. Purchase a collection agency surety bond in the amount of $5,000—only if you will be collecting child support payment debts.
2. Pay the required license fee. The fee for the 2-year license (expiring on January 1 of odd-numbered years) is $150 for those applying between February 1 and July 1 of an odd-numbered year. It is prorated for those applying during other time periods.
3. Submit your completed application through the NYC DCA online services portal or by mail or in person to the NYC DCA Licensing Center.

Why is a Surety Bond Required?

A surety bond is required only if you will be collecting child support payment debts. The bond serves as your guarantee to operate in a completely lawful and ethical manner in collecting such debts. The contract you sign with clients who hire you to collect child support payments must be approved by DCA as part of the licensing process. Anyone who suffers a financial loss as a result of your debt collection actions related to child support payments has the right to file a claim against your bond.

Understanding How Surety Bonds and Licensing Processes Work

What you must do to remain in compliance with your collection agency bond is spelled out in the surety bond agreement. Any violation that results in a financial loss by a consumer is grounds for a claim against the bond. Note that you are legally obligated to pay a claim if the surety company that issued the bond finds it to be valid.

In most cases, the surety company will pay a valid claim up front on your behalf. This ensures that the claimant is compensated in a timely manner, but it is strictly a courtesy. You must subsequently reimburse the surety company, which is indemnified by a clause in the surety bond agreement that makes you solely responsible for paying claims.

What Does It Cost?

The premium for any surety bond is a small percentage of the required bond amount. The surety company assigns each bond applicant an appropriate premium rate based on the applicant�s personal credit score.

The higher your credit score, the lower your premium rate will be. People with good credit typically pay the standard market rate of between 1% and 3% of the required bond amount.

Get Bonded Today

Get the surety bond you�ll need to obtain or renew your collection agency license. Apply with Single Source Insurance online or call for a quote.

Who Needs a Collection Agency License?

In Nebraska, an active license is required for any entity to conduct debt collection activities legally. This requirement applies to individuals as well as to partnerships, corporations, or other business entities.

What Does the Licensing Process Involve?

Collection agency licenses are issued by the Nebraska Secretary of State, specifically the Licensing Board. Here are the steps to get a collection agency license in Nebraska:

1. Complete the Collection Agency License application form available on the Licensing page of the Secretary of State website.
2. Gather the other documentation that must be submitted as part of your license application, including:
   • Financial statements
   • Certified copy of the entity�s Articles of Incorporation if applicable
   • A list of all of the agency�s solicitors or collectors to be licensed
   • Additional information as may be required (such as personal reference letters for individuals and partnerships applying for licensure)
3. Purchase a Nebraska Collection Agency Bond in the required amount:
   • $5,000 for less than 5 solicitors or collectors
   • $10,000 for 5-15 solicitors or collectors
   • $15,000 for more than 16 solicitors or collectors
4. Pay the licensing and investigation fees (currently $200 each) and submit your completed application and supporting documents to the Licensing Board no later than the first day of the first month of the next scheduled review period (i.e., January 1, April 1, July 1, or October 1).

Why is a Surety Bond Required?

The purpose of the surety bond requirement is to provide protection for consumers against financial loss resulting from the illegal or unethical collection practices of a licensed collection agency. The bond is your guarantee to operate in full compliance with all applicable statutes; failure to do so will result in claims against the bond.

Understanding How Surety Bonds and Licensing Processes Work

The terms of the surety bond agreement, a legally binding contract, detail what you must do to remain in compliance. Any party who suffers a financial loss stemming from your violation of those terms has the right to file a claim against your bond. Note that you are legally obligated to pay out claims if the surety company determines that they are valid.

If you aren�t able to pay a valid claim right away, the surety company will pay it on your behalf, but only as an advance to you. That doesn�t change the fact that in the eyes of the law, you are the one with sole responsibility for paying claims. Consequently, you must reimburse the surety for any such advance payment.

What Does It Cost?

To purchase a Nebraska Collection Agency Bond, you’ll pay a premium that is only a small fraction of the required bond amount. The surety company will set a premium rate that is based largely on your personal credit score. If you have a great credit score, you could pay a premium that is as little as 1% of the required bond amount. The lower your credit score, the higher the premium rate you will pay.

Get Bonded Today

Request a quote online to get the bond you need in order to obtain or renew your license as a Nebraska collection agency.

What is a Money Transmitter?

Anyone who operates a money service business (MSB) that moves money from one business to another or one person to another is a money transmitter. Every state has its own processes and requirements for obtaining a money transmitter license.

In general, a person who handles transactions that total $1,000 or more in a single day may be considered a money transmitter. Such transactions include cashing checks, exchanging currency, transferring money, or issuing/cashing traveler�s checks or money orders.

What Does the Licensing Process Involve?

The details of the money transmitter license process vary from state to state. However, there are certain commonalities. In general, applicants must:

• Complete their state�s license application
• Provide personal and business financial statements
• Provide proof of meeting a given net worth requirement
• Agree to a background check
• Pay application and license fees
• Obtain a surety bond in a given amount

Some states require successful completion of a pre-licensing training program and a passing score on an examination.

Why Is a Surety Bond Required?

A money transmitter bond serves as a guarantee that the money transmitter will conduct business in a lawful and ethical manner, in compliance with all applicable federal and state rules and regulations. Failure to do so can result in claims being filed against the surety bond, which the money transmitter is legally obligated to pay.

Understanding How Surety Bonds and Licensing Processes Work

Any party who suffers a financial loss as a result of a money transmitter�s unlawful or unethical business practices has the right to file a claim against the money transmitter surety bond. The surety company that issued the bond will first investigate to make sure the claim is valid.

Although the responsibility for paying claims belongs to the money transmitter, the surety company often will pay a valid claim up front and then seek reimbursement from the money transmitter. Every surety bond contract includes an indemnification clause that relieves the surety company of any legal responsibility for paying claims.

What Does It Cost?

Every state establishes the required amount of the money transmitter bond that must be purchased as part of the licensing process. The annual premium for the bond is a small percentage of that required bond amount. That percentage, the premium rate, is set by the surety bond company on a case-by-case basis.

The primary factors considered by the surety bond company in determining the premium rate for a given individual is the applicant�s personal credit score and financial standing. If your credit score is good, you will likely be assigned a premium rate in the range of 1% to 3%, which is considered the standard market rate. Applicants with credit challenges may pay a higher premium rate.

Get The Bond You Need

Apply for the bond you need to get your money transmitter license today. If you�re not sure what the bonding requirements are for money transmitters in your state, give us a call and speak with one of our experienced surety bond agents.

In Florida, collection agencies are licensed at the state level by the Office of Financial Regulation (FLOFR), Division of Consumer Finance. Two different types of collection agency licenses are issued, Consumer and Commercial, depending on what kind of third party debt an agency collects. Agencies that collect both consumer and commercial debt need only a Consumer Collection Agency license if less than 50% of their revenue comes from commercial debt collection. Here�s what you need to know.

What Does the Licensing Process Involve?

Applications for both Consumer and Commercial Collection Agency licenses are available on the FLOFR website. Aside from differences in the information that must be provided on the application form, one of the main differences in the two licensing processes is that applications for a Consumer Collection Agency are submitted online through FLOFR�s Regulatory Enforcement and Licensing (REAL) system, while Commercial Collection Agency licenses are submitted by mail. Also, applicants for a commercial license pay a higher application fee (currently $500) than the fee for a consumer collection agency (currently $200).

Perhaps the most significant difference between the two licensing processes is that applicants for a Commercial license must purchase a surety bond, while applicants for a Consumer license do not.

Why Is a Surety Bond Required?

The surety bond is a guarantee that the owner of a commercial collection agency will abide by all applicable laws in conducting business in the state of Florida.

Understanding How Surety Bonds and Licensing Processes Work

Every surety bond agreement is a legally binding contract involving three parties: the obligee, the principal, and the surety. In the case of a Florida collection agency surety bond:

• FLOFR is the obligee requiring the bond,
• The owner of the commercial collection agency is the principal that must purchase the bond, and
• The company that underwrites and issues the bond is the surety.

The terms of the surety bond agreement specify the conduct required of the principal. A party that suffers a financial loss because the principal failed to comply with the agreement can file a claim against the bond. The surety bond agreement makes the principal solely responsible for paying valid claims.

However, when a claim has been filed and deemed valid by the surety, the principal may not be able to pay it right away. This is a common occurrence, and the surety typically pays the claim up front and then seeks reimbursement from the principal. There is always the risk that the surety will have trouble recovering the claim amount from the principal.

What Does It Cost?

The principal pays an annual premium to obtain a Florida Commercial Collection Agency bond. While the required bond amount is set by FLOFR, the premium rate is determined by the surety on a case-by-case basis.

The primary factor the surety considers in approving a bond application and establishing the premium rate is the principal�s personal credit score, along with personal and business financial statements. Applicants with good credit typically pay the standard market rate of between 1% and 3% of the required bond amount.

Get Bonded Today

If you�re going through the process of obtaining or renewing your commercial collection agency license in Florida, we�re here to help you get the best possible rate on the required surety bond. Apply online today, or call us to discuss your needs with one of our experienced surety bond agents.

Licensing Requirements

Texas does not license collection agencies, but third-party debt collectors must file a $10,000 surety bond with the Texas secretary of state in order to operate legally within the state. This involves downloading the Surety Bond application form from the secretary of state�s website, completing it with information about the surety bond that the third-party debt collector has purchased, and returning the form to the Office of the Secretary of State, Registration Unit, in person or by U.S. mail.

Why Is a Surety Bond Required?

The purpose of requiring a surety bond is to ensure that Texas collection agencies operate in compliance with all applicable federal and state laws. The surety bond protects consumers against financial loss due to the unlawful or unethical business practices of the collection agency as defined in Chapter 392 of the Texas Finance Code. Any person damaged by the actions of the collection agency can file a claim against the bond.

Understanding How Surety Bonds and Licensing Processes Work

There are three parties to any surety bond agreement, which is a legally binding contract:

• The state of Texas, as the party requiring the purchase of the bond, is referred to as the obligee.
• The owner of the collection agency, as the party required to purchase the bond, is known as the principal.
• The company that underwrites and issues the bond is called the surety.

Each party has specific roles and responsibilities that are spelled out in the surety bond agreement.

When a claim is filed against a collection agency�s surety bond, the first thing that happens is that the surety conducts an investigation to ensure that the claim is valid. The principal is legally obligated to pay all valid claims against the bond. Ideally, the principal will settle or pay the claim right away.

In reality, the principal may not be willing or able to pay a claim in a timely manner. When that is the case, the surety will step in and pay the claim on behalf of the principal, and then seek reimbursement from the principal.

What Does It Cost?

Unlike insurance premiums, which often are paid monthly, the premium for a surety bond is paid in one lump sum at the time the bond is purchased. The annual premium for a collection agency bond is a small percentage of the required $10,000 bond amount. The surety determines what that percentage will be on a case-by-case basis, taking into consideration the principal�s personal credit score and financial circumstances.

Bond applicants with good credit typically pay between 1% and 3% of the required bond amount, which is the standard market rate. That comes to between $100 and $300.

Get the Bond You Need

Contact us to request a quote for the surety bond you need for your collection agency license.