Connecticut Consumer Collection Agency Bond: A Comprehensive Guide
This guide provides information for insurance agents to help consumer collection agencies obtain Connecticut Consumer Collection Agency Bonds
At a Glance:
- Lowest Cost: $375 per year or $38 per month, based on the bond applicant’s credit
- Bond Amount: $50,000
- Who Needs It: All consumer collection agencies seeking to obtain a license in the State of Connecticut
- Purpose: To ensure the public will receive compensation for any damages should the consumer collection agency fail to comply with licensing law
- Who Regulates Consumer Collection Agencies in Connecticut: The Connecticut Department of Banking
Connecticut statute 36a-801 requires all consumer collection agencies operating in the state to obtain a license with the Department of Banking. The Connecticut legislature enacted licensing laws and regulations to ensure that consumer collection agencies engage in ethical business practices. To provide financial security for the enforcement of the licensing law, consumer collection agencies must purchase and maintain a $5o,000 surety bond to be eligible for licensure.
What is the Purpose of the Connecticut Consumer Collection Agency Bond?
Connecticut requires consumer collection agencies to purchase a surety 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 consumer collection agency fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the consumer collection agency breaks licensing laws.
How Can an Insurance Agent Obtain a Connecticut Consumer Collection Agency Surety Bond?
BondExchange makes obtaining a Connecticut Consumer Collection Agency Bond easy. Simply login to your account and use our keyword search to find the “consumer” 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 Connecticut Consumer Collection Agency Bond?
Surety companies will run a credit check on the owners of the consumer collection agency to determine eligibility and pricing for the Connecticut Consumer Collection Agency bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the Connecticut Consumer Collection Agency Bond Cost?
The Connecticut Consumer Collection Agency surety bond can cost anywhere between $375 to $1,250 per year or $38 to $125 per month. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost of the $50,000 bond requirement.
$50,000 Consumer Collection Agency Bond Cost
|Credit Score||Bond Cost (1 year)||Bond Cost (1 month)|
|650 – 699||$500||$50|
|625 – 649||$625||$63|
|600 – 624||$750||$75|
|550 – 599||$1,500||$150|
|500 – 549||$2,500||$250|
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
How Does Connecticut Define “Consumer Collection Agency?”
To paraphrase Connecticut statute 36a-800, a consumer collection agency is any business entity that collects or attempts to collect consumer debt on behalf of a creditor. Exemptions to this definition include:
- Employees of a consumer collection agency
- Real estate brokers and lenders
- Public officials or individuals acting on the authority of a court order
- Loan servicers
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 Consumer Collection Agencies Apply for a License in Connecticut?
Consumer collection agencies in Connecticut must navigate several steps to secure their business license. Below are the general guidelines, but license applicants should refer to the NMLS’s application guidelines for details on the process.
License Period – The Connecticut Consumer Collection Agency License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Meet the Net Worth Requirements
Applicants for the Connecticut Consumer Collection Agency License must first amass a tangible company net worth (assets – liabilities) of at least $50,000. Businesses must submit financial statements, prepared by a CPA, verifying their net worth when submitting their license application. Companies who engage solely in debt buying are exempt from this requirement.
Step 2 – Designate a Qualifying Individual
License applicants must designate a qualifying individual who is responsible for ensuring the consumer collection agency complies with the licensing regulations. Qualifying individuals must authorize both a criminal background check and a credit report to be completed.
Step 3 – Purchase a Surety Bond
Consumer collection agencies must purchase and maintain a $5o,000 consumer collection agency surety bond
Step 4 – Request NMLS Account
The Connecticut Consumer Collection Agency License application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a license application, applicants must first request to obtain an NMLS account.
Step 5 – Complete the Application
- Financial statements indicating a tangible company net worth of at least $50,000
- The following information regarding the company’s operating and trust bank accounts:
- Account Type
- Name of Bank
- Address of Bank
- Account Number
- Completed disclosure questions
- Background check and credit report authorization for the company’s qualifying individual
- A company business plan containing the following information:
- Marketing strategies Products
- Target markets
- Fee schedule
- Operating structure that the applicant intends to employ
- Certificate of Good Standing obtained from the Connecticut Secretary of State
- The following document samples:
- Form letters used in the collection of debts in Connecticut
- Sample agreement utilized with company clients
- Sample contract that you will use with the creditor to whom the child support is owed (if applicable)
- Company formation documents
- A management chart detailing the leadership hierarchy of the company
Consumer collection agencies must pay the following fees when submitting their license application:
- $500 license fee
- $100 NMLS processing fee
- $15 credit report fee (per person)
- $15 background check fee (per person)
How Do Connecticut Consumer Collection Agencies Renew Their License?
Consumer collection agencies can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Connecticut Consumer Collection Agency License expires on December 31 of each year and must be renewed before the expiration date
What Are the Insurance Requirements for the Connecticut Consumer Collection Agency License?
The State of Connecticut does not require consumer collection agencies to obtain any form of liability insurance as a prerequisite to obtaining a business license. Collection agencies must purchase and maintain a $5o,000 surety bond.
How Do Connecticut Consumer Collection Agencies File Their Bond?
Consumer collection agencies should mail the completed bond form, including the power of attorney, to the following address:
Department of Banking
260 Constitution Plaza
Hartford CT 06103-1800
The consumer collection agency surety bond requires signatures from both the surety company that issues the bond and a representative from the collection agency. The surety company should include the following information on the bond form:
- Legal name and state/county of entity/individual(s) buying the bond
- Surety company’s name and state/county
- Date the bond is signed
- Witness signatures for both the principal and the surety
What Can Consumer Collection Agencies Do to Avoid Claims Against the Connecticut Consumer Collection Agency Bond?
To avoid claims on the Consumer Collection Agency Bond, bond holders must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:
- Properly account for all funds received
- Do not engage in any acts of fraud
What Other Insurance Products Can Agents Offer Consumer Collection Agencies in Connecticut?
Connecticut does not require consumer collection agencies 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 Connecticut Consumer Collection Agency Customers?
The NMLS conveniently provides a public database to search for active consumer collection agencies in Connecticut. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing service