California Finance Lender Bond: A Comprehensive Guide
This guide provides information for insurance agents to help finance lenders and brokers obtain California Finance Lender Bonds
*This page focuses solely on the bonding requirements for Non-Residential Finance Lenders and Brokers. For information on the bonding requirements for residential finance lenders and brokers click here
At a Glance:
- Lowest Cost: $225 per year or $23 per month
- Bond Amount: $25,000
- Who Needs It: All finance lenders and brokers seeking to obtain a license in the State of California
- Purpose: To ensure the public will receive compensation for any damages should the finance lender/broker fail to comply with licensing law
- Who Regulates Finance Lenders and Brokers in California: The California Department of Financial Protection and Innovation
Background
California Statute 22100 requires all finance lenders and brokers operating in the state to obtain a license with the Department of Financial Protection and Innovation. The California legislature enacted the licensing laws and regulations to ensure that finance lenders and brokers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, finance lenders and brokers must purchase and maintain a $25,000 finance lender surety bond to be eligible for licensure.
What is the Purpose of the California Finance Lender Bond?
California requires finance lenders and brokers to purchase the finance lender bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the lender/broker fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the finance lender/broker breaks licensing laws.
How Can an Insurance Agent Obtain a California Finance Lender Surety Bond?
BondExchange makes obtaining a California Finance Lender Bond easy. Simply login to your account and use our keyword search to find the “finance” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
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Is a Credit Check Required for the California Finance Lender Bond?
No, a credit check is not required for the $25,000 California Finance Lender Bond. Because the bond is considered relatively low risk, surety companies will offer the same rate to all lenders/brokers in California.
How Much Does the California Finance Lender Bond Cost?
The California Finance Lender surety bond costs either $225 per year or $23 per month.
How does California Define “Finance Lender”?
The California DFPI defines a finance lender as “any person who is engaged in the business of making consumer or commercial loans.”
How Does California Define “Finance Broker”?
The California DFPI Defines a finance broker as “any person engaged in the business of negotiating or performing any act as broker in connection with loans made by a finance lender.”
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How do Non-Residential Finance Lenders and Brokers Apply for a License in California?
Non-residential finance lenders and brokers in California must navigate several steps to secure their business licenses. Below are the general guidelines, but license applicants should refer to the application form for details on the process.
License Period – The California Finance Lender License expires on January 1 of each year and must be renewed before the expiration date
Step 1 – Meet the Net Worth Requirements
Applicants for the California California Finance Lender License must amass a company net worth (assets – liabilities) of at least $25,000. Applicants must submit financial statements verifying their company’s net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Non-residential finance lenders and brokers must purchase and maintain a $25,000 finance lender surety bond
Step 3 – Complete the Application
All California Non-Residential Finance Lender License applications should be mailed, along with the $300 application fee (plus an additional $20 per individual subject to fingerprinting requirements), to the following address:
Department of Financial Protection and Innovation
Financial Services
320 W. 4th Street, Suite 750
Los Angeles, CA 90013
Finance lenders/brokers must complete the application in its entirety, and submit organizational documents and a comprehensive business plan with their application.
How Do California Finance Lenders/Brokers Renew Their License?
Finance lenders should mail their completed renewal application to the following address:
Department of Financial Protection and Innovation
Financial Services
320 W. 4th Street, Suite 750
Los Angeles, CA 90013
The California Finance Lender License expires on January 1 of each year and must be renewed before the expiration date
What Are the Insurance Requirements for the California Finance Lender License?
The State of California does not require finance lenders and brokers to obtain any form of liability insurance as a prerequisite to obtaining a Finance Lender License. Lenders and brokers must purchase and maintain a $25,000 finance lender surety bond.
How Do California Finance Lenders/Brokers File Their Bond?
Finance lenders/brokers should mail the completed bond form, including the power of attorney, to the following address:
Department of Financial Protection and Innovation
Financial Services
320 W. 4th Street, Suite 750
Los Angeles, CA 90013
The finance lender surety bond requires signatures from both the surety company that issues the bond and the lender/broker. The surety company should include the following information on the bond form:
- Legal name and address of entity/individual(s) buying the bond
- Surety company’s name, state of incorporation, and address
- Bond amount
- Date the bond goes into effect
What Can Finance Lenders and Brokers Do to Avoid Claims Against the California Finance Lender Bond?
To avoid claims on the Finance Lender Bond, lenders and brokers must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:
- Do not engage, or allow representatives of the business to engage, in any acts of fraud
- Pay all taxes and fees on time and in full
What Other Insurance Products Can Agents Offer Finance Lenders/Brokers in California?
California does not require finance lenders and brokers to obtain any form of liability insurance. However, most reputable businesses will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for California Finance Lender Customers?
California conveniently provides a public database to search for active finance lenders/brokers in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.