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.
How the Florida Collection Agency Licensing Process Works
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.