Connecticut Debt Adjuster Bond: A Comprehensive Guide

April 6, 2021

Connecticut Debt Negotiator Bond

This guide provides information for insurance agents to help debt adjusters obtain Connecticut Debt Adjuster Bonds

At a Glance:

  • Average Cost: Between 2% to 5% of the bond amount per year based on the debt adjuster’s credit
  • Bond Amount: Determined on a case by case basis (more on this later)
  • Who Needs It: All debt adjusters seeking to obtain a license in the State of Connecticut
  • Purpose: To ensure the public will receive compensation for any damages should the debt adjuster fail to comply with licensing law
  • Who Regulates Debt Adjusters in Connecticut: The Connecticut Department of Banking

Background

Connecticut statute 36a-556 requires all debt adjusters operating in the state to obtain a license with the Department of Banking. The Connecticut legislature enacted the licensing laws and regulations to ensure that debt adjusters engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, debt adjusters must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Connecticut Debt Adjuster Bond?

Connecticut requires debt adjusters 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 debt adjuster fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the debt adjuster breaks licensing laws.

 Connecticut Debt Adjuster Bond Form

Connecticut Debt Adjuster Bond Form

How Can an Insurance Agent Obtain a Connecticut Debt Adjuster Surety Bond?

BondExchange makes obtaining a Connecticut Debt Adjuster Bond easy. Simply login to your account and use our keyword search to find the “debt” bond in our database. Don’t have a login? Enroll 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.

How is the Bond Amount Determined?

Connecticut Statute 361-664 states that the bond must be $40,000 or “twice the amount of the average daily balance of the payments received by the applicant from Connecticut debtors in connection with the applicant’s debt adjustment activity during the preceding twelve months ending June thirtieth of each year”, whichever is greater.

Debt adjusters who have obtained the business of a previous debt adjuster, the bond must be “the amount of the predecessor’s debt adjustment activity during such preceding period or one million dollars”, whichever is less.

Is a Credit Check Required for the Connecticut Debt Adjuster Bond?

Surety companies will run a credit check on the owners of the debt adjusting company to determine eligibility and pricing for the Connecticut Debt Adjuster 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 Debt Adjuster Bond Cost?

The Connecticut Debt Adjuster surety bond can cost anywhere between 2% to 5% of the bond amount per year. 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 on a $40,000 bond requirement.

$40,000 Debt Adjuster Bond Cost

Credit Score Bond Cost (1 year)
650+ $8,000
600 – 649 $1,600
450 – 599 $2,000

*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 “Debt Adjuster?”

To paraphrase Connecticut Statute 36a-655, a debt adjuster is any business entity who receives money from a debtor and distributes these funds to a creditor.

How do Debt Adjusters Apply for a License in Connecticut?

Debt adjusters in Connecticut must navigate several steps to secure their license. Below are the general guidelines, but license applicants should refer to the licensing statutes for details on the process.

License Period – The Connecticut Debt Adjuster License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Determine the License Types

Connecticut requires debt adjusters to obtain specific licenses corresponding to the nature in which the adjuster’s business operates. Below are the different types of the Connecticut Debt Adjuster License.

Step 2 – Purchase a Surety Bond

Debt adjusters must purchase and maintain a surety bond (limits outlined in the previous section)

Step 3 – Designate a Qualifying Individual

Debt adjusters must designate a qualifying individual who is responsible for managing the day to day operations of the debt adjusting business. Qualifying individuals are subject to both background and credit checks.

Step 4 – Request a NMLS Account

The Connecticut Debt Adjuster 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

All Connecticut Debt Adjuster License applications can be completed online through the NMLS. Applicants must complete entire the application, and submit the following items:

    • Unaudited financial statements prepared by a CPA
    • The following company contacts:
      • Primary Company Contact
      • Accounting
      • Exam Billing
      • Licensing
      • Consumer Complaint (Public)
      • Exam Delivery
      • Litigation
      • Consumer Complaint (Regulator)
      • Legal
      • Pre-Exam Contact
    • The following information pertaining to any operating and trust accounts:
      • Account Type
      • Name of Bank
      • Address of Bank
      • Account Number
    • A company business plan detailing the following information:
      • Marketing strategies
      • Products
      • Target markets
      • Fee schedule
      • Operating structure the applicant intends to employ
    • Certificate of Good Standing obtained from the Connecticut Secretary of State
    • A sample debt adjustment contract used with a consumer (include the fees charged for services)
    • Company formation documents
    • A management chart detailing the company’s hierarchy

Applicants for the Connecticut Debt Adjuster license must pay the following fees when submitting their license application:

    • $900 total fees for for-profit organizations
    • $350 total fees for non-profit organizations

How Do Connecticut Debt Adjusters Renew Their License?

Debt adjusters can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Connecticut Debt Adjuster License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Connecticut Debt Adjuster License?

The State of Connecticut does not require debt adjusters to obtain any form of liability insurance as a prerequisite to obtaining a business license. Debt adjusters must purchase and maintain a  surety bond (limits outlined in the previous section).

How Do Connecticut Debt Adjusters File Their Bond?

Debt adjusters should submit the completed bond form, including the power of attorney, electronically through the NMLS. Additionally, debt adjusters must mail their completed bond form to the following address:

Department of Banking
260 Constitution Plaza
Hartford CT 06103-1800

The debt adjuster surety bond requires signatures from both the surety company that issues the bond and the debt adjuster. 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
  • Bond amount
  • Date the bond is signed
  • Witness signatures for both the principal and surety company

What Can Connecticut Debt Adjusters Do to Avoid Claims Against Their Bond?

In order to avoid claims made against their bond, debt adjusters in Connecticut must follow all license regulations in the state. Including some of the most important issues below that tend to cause claims:

  • Honor all written agreements made with customers
  • Faithfully account for all funds received from customers

What Other Insurance Products Can Agents Offer Debt Adjusters in Connecticut?

Connecticut does not require debt adjusters to purchase any form of liability insurance as a prerequisite to obtaining a license. However, most reputable debt adjusters 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 Debt Adjuster Customers?

The NMLS conveniently provides a public database to search for active debt adjusters in Connecticut. The database can be accessed here. Contact BondExchange for help developing a marketing piece. Agents can also leverage our print-mail relationships for discounted mailing services.

2021-04-06T13:36:54+00:00

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