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:
- 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)
- Purchase a collection agency surety bond in the amount of $5,000—only if you will be collecting child support payment debts.
- 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.
- 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.
How Does It 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.
Understanding the Process: How Surety Bonds Work for Licensing
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.