Illinois Debt Settlement Service Provider Bond: A Comprehensive Guide
This guide provides information for insurance agents to help debt settlers obtain Illinois Debt Settlement Service Provider Bonds
At a Glance:
- Lowest Cost: $1,500 per year or $150 per month, based on the applicant’s credit
- Bond Amount: $100,000
- Who Needs it: All debt settlement service providers seeking to obtain a license in Illinois
- Purpose: To ensure the public will receive compensation for any damages should the debt settler fail to comply with licensing law
- Who Regulates Debt Settlement Service Providers in Illinois: The Illinois Department of Financial and Professional Regulation
Background
The Illinois Debt Settlement Consumer Protection Act requires all debt settlement service providers operating in the state to obtain a license with the Department of Financial and Professional Regulation. The Illinois legislature enacted the licensing laws and regulations to ensure that debt settlers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, debt settlers must purchase and maintain a $100,000 surety bond to be eligible for licensure.
What is the Purpose of the Illinois Debt Settlement Service Provider Bond?
Illinois requires debt settlement 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 settler fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the debt settler breaks licensing laws.
How Can an Insurance Agent Obtain an Illinois Debt Settlement Service Provider Surety Bond?
BondExchange makes obtaining an Illinois Debt Settlement Service Provider 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.
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 Illinois Debt Settlement Service Provider Bond?
Surety companies will run a credit check on the owners of the debt settlement company to determine eligibility and pricing for the Illinois Debt Settlement Service Provider 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 Illinois Debt Settlement Service Provider Bond Cost?
The Illinois Debt Settlement Service Provider surety bond can cost anywhere between $1,500 to $7,500 per year or $150 to $750 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 on the $100,000 bond requirement.
$100,000 Debt Settlement Service Provider Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $1,500 | $150 |
| 650 – 799 | $2,000 | $200 |
| 600 – 649 | $4,000 | $400 |
| 450 – 599 | $7,500 | $750 |
*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 Illinois Define “Debt Settlement Service Provider?”
The Illinois Debt Settlement Consumer Protection Act defines a debt settlement service provider as any business entity who provides debt settlement services to the general public for a fee.
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 Settlement Service Providers Apply for a License in Illinois?
Debt settlement service providers in Illinois must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.
License Period – The Illinois Debt Settlement 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 Illinois Debt Settlement License must have a company net worth (assets – liabilities) of at least $30,000. Applicants must submit an unaudited financial statement verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Debt settlers must purchase and maintain a $25,000 surety bond
Step 3 – Request NMLS Account
The Illinois Debt Settlement 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 4 – Complete the Application
All Illinois Debt Settlement License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Unaudited financial statements indicating a company net worth of of at least $30,000
- Primary company and consumer complaint contact information
- A separate bank account used for the purpose of depositing customer funds and making disbursements to creditors or transferring fees to the general account
- Business plan containing the following information:
- Marketing strategies
- Products
- Target markets
- Fee schedule
- Operating structure the applicant intends to employ
- Business history
- Certificate of Good Standing obtained from the Illinois Secretary of State
- Company internal staffing policies and a list of all employees
- Copy of a proposed debt settlement agreement
- Copy of proposed debt settlement budget analysis form
- Company formation documents
- Management chart detailing the company’s hierarchy
- Organizational chart detailing the company’s ownership structure
- Credit report explanation for all derogatory accounts
- Resume detailing the applicant’s job experience
Applicants for the Illinois Debt Settlement License must pay the following fees when submitting their application:
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- $1,000 license fee
- $350 application fee
- $15 credit report fee (per person)
How Do Illinois Debt Settlement Service Providers Renew Their License?
Debt settlement service providers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Illinois Debt Settlement License expires on January 1 of each year and must be renewed before the expiration date
What Are the Insurance Requirements for the Illinois Debt Settlement License?
The State of Illinois does not require debt settlers to obtain any form of liability insurance as a prerequisite to obtaining a business license. Debt settlers must purchase and maintain a $25,000 surety bond.
How Do Illinois Debt Settlement Service Providers File Their Bond?
Debt settlers should submit the completed bond form, including the power of attorney, electronically through the NMLS. The surety bond requires signatures from both the surety company that issues the bond and a representative from the debt settlement service provider. The surety company should include the following information on the bond form:
- Legal name, city and county of entity/individual(s) buying the bond
- Surety company’s name, city and county
- Bond term
- Date the bond is signed
- Date the bond goes into effect
What Can Illinois Debt Settlement Service Providers Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, debt settlement service providers in Illinois must follow all license regulations in the state. Including some of the most important issues below that tend to cause claims:
- Pay all required taxes and fees
- Do not engage in any acts of fraud
- Properly account for all funds received from consumers
What Other Insurance Products Can Agents Offer Debt Settlement Service Providers in Illinois?
Illinois does not require debt settlement service providers to purchase any form of liability insurance as a prerequisite to obtaining a license. 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 Illinois Debt Settlement Service Provider Customers?
The NMLS conveniently provides a public database to search for active debt settlement service providers in Illinois. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.