Delaware Debt Management Services Bond: A Comprehensive Guide
This guide provides information for insurance agents to help debt management service providers obtain Delaware Debt Management Service Provider Bonds
At a Glance:
- Lowest Cost: $750 per year or $75 per month, based on the debt management services provider’s credit
- Bond Amount: A minimum of $50,000 (more on this topic later)
- Who Needs it: All debt management service providers seeking to obtain a license in Delaware
- Purpose: To ensure the public will receive compensation for any damages should the debt management service provider fail to comply with licensing law
- Who Regulates Debt Management Service Providers in Delaware: The Delaware Department of Justice
Background
Delaware Statute 2404A requires all debt management service providers operating in the state to obtain a license with the Department of Justice. The Delaware legislature enacted the licensing laws and regulations to ensure that debt management service providers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, debt management service providers must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Delaware Debt Management Services Bond?
Delaware requires debt management service providers 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 management service provider fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the debt management service provider breaks licensing laws.
How Can an Insurance Agent Obtain a Delaware Debt Management Services Surety Bond?
BondExchange makes obtaining a Delaware Debt Management Services 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? 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.
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How is the Bond Amount Determined?
Delaware Statute 2413A grants the Delaware Attorney General the authority to determine the limit on the Delaware Debt Management Services Bond on a case by case basis. The bond must be a minimum of $50,000, and the Attorney General will determine whether the limit should be increased by examining the following factors:
- The dollar value of the licensed provider’s Delaware business;
- The dollar value of all trusts accounts; and
- Such other and further criteria as the Attorney General may deem necessary and appropriate
Is a Credit Check Required for the Delaware Debt Management Services Bond?
Surety companies will run a credit check on the owners of the debt management services company to determine eligibility and pricing for the Delaware Debt Management Services bond. Owner’s 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 Delaware Debt Management Services Bond Cost?
The Delaware Debt Management Services surety bond can cost anywhere between 1.5% 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 $50,000 bond requirement.
$50,000 Debt Management Services Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $750 | $75 |
| 650 – 799 | $1,000 | $100 |
| 600 – 649 | $2,000 | $200 |
| 450 – 599 | $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 Delaware Define “Debt Management Services Provider?”
To paraphrase Delaware Statute 2402A, a debt management services provider is any individual or business entity who acts as an intermediary between a debtor and creditor with the intention of obtaining concessions for the benefit of the debtor. Exemptions to this definition include:
- Attorneys
- Accountants
- Financial planners
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 Debt Management Services Providers Apply for a License in Delaware?
Debt management services providers in Delaware 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 Delaware Debt Management Services License is valid for one year from the date of issuance and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Debt management services providers must purchase and maintain a surety bond with a minimum limit of $50,000
Step 2 – Purchase Insurance
All applicants for the Debt Management Services License must purchase liability insurance with a minimum limit of $250,000, and a maximum deductible of $5,000. Debt management services providers must submit a certificate of insurance with their license application.
Step 3 – Become Accredited
License applicants must obtain accreditation from an approved independent accrediting organization. A list of accreditation agencies authorized by the Delaware Attorney General can be found here.
Step 4 – Complete the Application
All Delaware Debt Management Services License applications must be sent to the following address:
Consumer Protection Unit
Department of Justice
820 N. French St., Fifth Floor
Wilmington, DE 19801
Debt Management Services Providers must complete the application in its entirety, and submit the following items:
-
- Audited financial statements prepared by a CPA
- Irrevocable consent allowing the Attorney General to examine the applicant’s trust account (if applicable)
- Copy of the educational materials of the three most common educational programs provided for Delaware residents and a description of each provider
- Summary of the company’s financial analysis and initial budget plan that are used to determine the financial condition of individuals
- Copy of each form of proposed debt management plan agreement used with Delaware consumers
- All screens viewed by consumers in internet counseling sessions
- Schedule of fees (including voluntary donations) for all services to be used with Delaware consumers
- Proof of ‘good standing’ from the state in which the company is chartered or organized
License applicants must pay a $2,000 fee when submitting their application
How Do Delaware Debt Management Services Providers Renew Their License?
Debt management services providers in Delaware should send their completed renewal application, including a $1,000 renewal fee, to the following address:
Consumer Protection Unit
Department of Justice
820 N. French St., Fifth Floor
Wilmington, DE 19801
The Delaware Debt Management Services License is valid for one year from the date of issuance and must be renewed before the expiration date.
What Are the Insurance Requirements for the Delaware Debt Management Services License?
Delaware requires debt management services providers to purchase liability insurance with a minimum limit of $250,000, and a maximum deductible of $5,000. Debt management services providers must purchase and maintain a surety bond with a minimum limit of $50,000.
How Do Delaware Debt Management Services Providers File Their Bond?
Debt management services providers should mail the completed bond form, including the power of attorney, to the following address:
Consumer Protection Unit
Department of Justice
820 N. French St., Fifth Floor
Wilmington, DE 19801
The surety bond requires signatures from both the surety company that issues the bond and a representative from the debt management serivces organization. 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 and address
- Bond amount
- Date the bond is signed
- Date the bond goes into effect
What Can Delaware Debt Management Services Providers Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, debt management services providers in Delaware must ensure not to engage in any acts of fraud or misrepresentation when servicing Delaware consumers.
What Other Insurance Products Can Agents Offer Debt Management Services Providers in Delaware?
Delaware requires debt management services providers to purchase liability insurance. 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 DC Student Loan Servicer Customers?
Delaware conveniently provides a public database to search for active debt management services providers 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.