Maryland Debt Settlement Services Bond: A Comprehensive Guide
May 28, 2021
This guide provides information for insurance agents to help their customers obtain Maryland Debt Settlement Services Bonds
At a Glance:
- Average Cost: Between $750 to $2,500 per year based on the applicant’s credit
- Bond Amount: $50,000
- Who Needs it: All debt settlement services providers operating in Maryland
- Purpose:To ensure the public will receive compensation for any damages should the debt settlement services provider fail to comply with registration law
- Who Regulates Debt Settlement Services Providers in Maryland: The Maryland Commissioner of Financial Regulation
Maryland statute 12-1004 requires all debt settlement services providers operating in the state to register with the Commissioner of Financial Protection. The Maryland legislature enacted the registration laws and regulations to ensure that debt settlement services providers engage in ethical business practices. In order to provide financial security for the enforcement of the registration law, debt settlement services providers must purchase and maintain a $50,000 surety bond to be eligible for registration.
What is the Purpose of the Maryland Debt Settlement Services Bond?
Maryland requires debt settlement services providers to purchase a surety bond as part of the application process to obtain a business registration. The bond ensures that the public will receive compensation for financial harm if the debt settlement services provider fails to comply with the registration regulations set forth in Maryland statutes 12-1001-1017. Specifically, the bond protects the public in the event the debt settlement services provider engages in any acts of fraud or misrepresents the types of services they provide. In short, the bond is a type of insurance that protects the public if the debt settlement services provider breaks registration laws.
How Can an Insurance Agent Obtain a Maryland Debt Settlement Services Provider Surety Bond?
BondExchange makes obtaining a Maryland Debt Settlement Services 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? 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.
Is a Credit Check Required for the Maryland Debt Settlement Services Bond?
Surety companies will run a credit check on the owner’s of the debt settlement services company to determine eligibility and pricing for the Maryland Debt Settlement Services 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 Maryland Debt Settlement Services Bond Cost?
The Maryland Debt Settlement Services surety bond can cost anywhere between $750 to $2,500 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 the $50,000 bond requirement.
$50,000 Debt Settlement Services Bond Cost
|Credit Score||Bond Cost (1 year)|
|650 – 799||$1,000|
|600 – 649||$2,000|
|450 – 599||$2,500|
*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 Maryland Define “Debt Settlement Services Provider?”
Maryland statute 12-1001 defines a debt settlement services provider as any business entity who “renegotiates, settles, reduces, or in any way alters the terms of payment or other terms of a debt between a consumer and one or more unsecured creditors or debt collectors, including a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector.”
How do Debt Settlement Services Providers Apply for a Registration in Maryland?
Debt settlement services providers in Maryland must navigate several steps to secure their registration. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.
Registration Period – The Maryland Debt Settlement Services Registration expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Debt settlement service providers must purchase and maintain a $50,000 surety bond
Step 2 – Request a NMLS Account
The Maryland Debt Settlement Services Registration application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a registration application, applicants must first request to obtain an NMLS account.
Step 3 – Complete the Application
- Primary company and consumer complaint contact information
- Company business plan containing the following information:
- Marketing strategies
- Target markets
- Fee schedule
- Operating structure the applicant intends to employ
- Certificate of Good Standing
- Company formation documents
- Management chart detailing the company’s hierarchy
- Organizational chart detailing the company’s ownership structure
Debt settlement services providers must pay a $400 registration fee when submitting their application
How Do Maryland Debt Settlement Services Providers Renew Their Registration?
Debt settlement services providers can renew their registration online through the NMLS. Registration holders need to simply login to their account to access their renewal application. The Maryland Debt Settlement Services Registration expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Maryland Debt Settlement Services Registration?
The State of Maryland does not require debt settlement services providers to obtain any form of liability insurance as a prerequisite to obtaining a business registration. Debt settlement service providers must purchase and maintain a $50,000 surety bond.
How Do Maryland Debt Settlement Services Providers File Their Bond?
Debt settlement services providers 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 services company. The surety company should include the following information on the bond form:
- Legal name of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Maryland Debt Settlement Services Providers Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, debt settlement services providers in Maryland must follow all registration regulations in the state, including some of the most important issues below that tend to cause claims:
- Do not engage in any acts of fraud
- Do not misrepresent the services provided
What Other Insurance Products Can Agents Offer Debt Settlement Services Providers in Maryland?
Maryland does not require debt settlement services 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 Maryland Debt Settlement Services Provider Customers?
The NMLS conveniently provides a public database to search for active debt settlement services providers in Maryland. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.