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:
- 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.
- 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.
- Set up a trust account at a federally insured bank.
- Obtain a collection agency bond in the amount of $5,000 from a surety bond company licensed to do business in Washington.
- 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.
How Does It 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.
Licensing Process for Collection Agencies in Washington State
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.