Nebraska Collection Agency Bond: A Comprehensive Guide

July 19, 2021

Nebraska Collection Agency Bond

This guide provides information for insurance agents to help their customers obtain Nebraska Collection Agency Bonds

At a Glance:

  • Average Cost: Between 1% to 5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: 
    • $5,000 for collection agencies with less than 5 solicitors
    • $10,000 for collection agencies with 5 to 15 solicitors
    • $15,000 for collection agencies with 16 or more solicitors
  • Who Needs it: All collection agencies operating in Nebraska
  • Purpose: To ensure the public will receive compensation for any damages should the collection agency engage in any acts of fraud
  • Who Regulates Collection Agencies in Nebraska: The Nebraska Secretary of State

Background

Nebraska statute 45-601 requires all collection agencies operating in the state to obtain a license with the Secretary of State. The Nebraska legislature enacted the licensing laws and regulations to ensure that collection agencies engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, collection agencies must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Nebraska Collection Agency Bond?

Nebraska requires 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 collection agency fails to comply with the regulations set forth in the Nebraska statute 45-608. Specifically, the bond protects the public in the event the collection agency fails to pay money owed to creditors or breaches any contracts made with clients. In short, the bond is a type of insurance that protects the public if the collection agency breaks licensing laws.

Nebraska Collection Agency Bond Form

Nebraska Collection Agency Bond Form

How Can an Insurance Agent Obtain a Nebraska Collection Agency Bond?

BondExchange makes obtaining a Nebraska Collection Agency Bond easy. Simply login to your account and use our keyword search to find the “collection” 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 Nebraska Collection Agency Bond?

Surety companies will run a credit check on the owners of the collection agency firm to determine eligibility and pricing for the Nebraska 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 Nebraska Collection Agency Bond Cost?

The Nebraska Collection Agency Bond can cost anywhere between 1% 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 $10,000 bond requirement.

$10,000 Collection Agency Bond Cost

Credit Score Bond Cost (1 year)
650+ $100
625 – 649 $125
600 – 624 $188
550 – 599 $400
500 – 549 $500

How Does Nebraska Define “Collection Agency?”

Nebraska statute 45-602 defines a collection agency as any business entity who engages in one or more of the following activities:

  • Collects debts on behalf of another individual or business
  • Collects their own debts using a fictitious name
  • Sells forms or documents used in the collection of debt where those forms/documents indicate the collector is a third party

How do Collection Agencies Apply For a License in Nebraska?

Collection agencies in Nebraska must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the licensing guide for details on the process.

License Period – The Nebraska Collection Agency License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Collection agencies must purchase and maintain a surety bond with the following limit:

    • $5,000 for collection agencies with less than 5 solicitors
    • $10,000 for collection agencies with 5 to 15 solicitors
    • $15,000 for collection agencies with 16 or more solicitors

Step 2 – Complete the Application

All Nebraska Collection Agency License applications should be mailed to the following address:

Secretary of State
State Capitol
1201 N Street, Suite 120
Lincoln, NE 68508

Collection agencies must complete the application in its entirety, and submit the following items:

    • List of ten customers (out of state applicants only)
    • Three personal references and personal financial statements (sole proprietorship and partnership applicants only)
    • Company formation documents
    • Company financial statements
    • Alphabetical list of all company solicitors/collectors
    • List of other states the company is licensed in

Collection agencies must pay the following fees when submitting their license application:

    • $200 license fee
    • $200 application fee

How Do Nebraska Collection Agencies Renew Their License?

Collection agencies should mail their completed renewal application, including all appropriate fees, to the following address:

Secretary of State
State Capitol
1201 N Street, Suite 120
Lincoln, NE 68508

The Nebraska 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 Nebraska Collection Agency License?

Nebraska does not require collection agencies to purchase any form of liability insurance as a prerequisite to obtaining a business license. Collection agencies must purchase and maintain a surety bond with the following limit:

  • $5,000 for collection agencies with less than 5 solicitors
  • $10,000 for collection agencies with 5 to 15 solicitors
  • $15,000 for collection agencies with 16 or more solicitors

How Do Nebraska Collection Agencies File Their Bond?

Collection agencies should mail the completed bond form, including the power of attorney, to the following address:

Secretary of State
State Capitol
1201 N Street, Suite 120
Lincoln, NE 68508

The collection agency surety bond requires signatures from both the surety company that issues the bond and a represenative from the collection agency. 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

What Can Nebraska Collection Agencies Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, collection agencies in Nebraska must follow all license regulations in the state, including some of the most important issues below that tend to cause claim

  • Do not engage in any acts of fraud
  • Pay all funds owed to creditors
  • Do not engage in illegal collection practices

What Other Insurance Products Can Agents Offer Collection Agencies in Nebraska?

Nebraska does not require collection agencies to purchase any form of liability insurance as a prerequisite to obtaining a business 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 Nebraska Collection Agency Customers?

Nebraska conveniently provides a public database to search for active collection agencies 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.

2021-07-20T16:29:37+00:00

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