New Mexico Collection Agency Bond: A Comprehensive Guide
July 28, 2021
This guide provides information for insurance agents to help their customers obtain New Mexico Collection Agency Bonds
At a Glance:
- Average Cost: Between 0.5% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Minimum of $5,000 (more on this later)
- Who Needs it: All collection agencies operating in New Mexico
- Purpose: To ensure the public will receive compensation for any damages should the collection agency violate licensing law
- Who Regulates Collection Agencies in New Mexico: The New Mexico Financial Institutions Division
New Mexico statute 61-18A-5 requires all collection agencies operating in the state to obtain a license with the Financial Institutions Division. The New Mexico 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 New Mexico Collection Agency Bond?
New Mexico 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 New Mexico statutes 61-18A. Specifically, the bond protects the public in the event the collection agency engages in any acts of fraud or fails to pay funds collected to creditors. In short, the bond is a type of insurance that protects the public if the collection agency breaks licensing laws.
How Can an Insurance Agent Obtain a New Mexico Collection Agency Bond?
BondExchange makes obtaining a New Mexico 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.
How is the Bond Amount Determined?
The bond amount is determined based on factors such as the collection agency’s total proceeds, financial stability, and the number of branch locations the collection agency operates. The bond amount must be a minimum of $5,000. The Financial Institutions Division provides an easy to use worksheet that collection agencies can utilize to calculate their bond amount. The worksheet can be accessed here.
Is a Credit Check Required for the New Mexico Collection Agency Bond?
Surety companies will run a credit check on the owners of the collection agency to determine eligibility and pricing for the New Mexico 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 New Mexico Collection Agency Bond Cost?
The New Mexico Collection Agency Bond can cost anywhere between 0.5% 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 $20,000 bond requirement.
$20,000 Collection Agency Bond Cost
|Credit Score||Bond Cost (1 year)|
|650 – 699||$200|
|625 – 649||$250|
|600 – 624||$376|
|550 – 599||$800|
|500 – 549||$1,000|
How Does New Mexico Define “Collection Agency?”
New Mexico statute 61-18A-33 defines a collection agency as any business entity who collects debts on behalf of a creditor or who collects their own debts using a different name, making it appear a separate entity is collecting the debts.
How do Collection Agencies Apply For a License in New Mexico?
Collection agencies in New Mexico 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 New Mexico Collection Agency License expires on May 31 of each year and must be renewed before the expiration date
Step 1 – Meet the Net Worth Requirements
Applicants for the New Mexico Collection Agency License must have a company net worth (assets – liabilities) of at least $10,000, with a minimum of $1,000 in liquid operating assets. Applicants must submit a financial statement, prepared by a CPA or signed by an executive officer, verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Collection agencies must purchase and maintain a surety bond with a minimum limit of $5,000. Click here to calculate the required bond amount for your customer’s agency.
Step 3 – Hire a Qualifying Individual
Collection agencies must hire a qualifying individual, who is responsible for actions committed by the company, and who is capable of handling the day to day operations of the collection agency. The qualifying individual must be employed in a management position.
Step 4 – Request a NMLS Account
The New Mexico Collection Agency 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
- Company financial statements indicating a net worth of at least $10,000 with a minimum of $1,000 in liquid operating assets
- The following company contacts:
- Primary consumer complaint
- Disclosure questions
- Certificate of Good Standing
- Organizational chart indicating the company’s ownership structure
Collection agencies must pay a $600 application fee when submitting their license application.
How Do New Mexico Collection Agencies Renew Their License?
Collection agencies can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The New Mexico Collection Agency License expires on May 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the New Mexico Collection Agency License?
New Mexico 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 a minimum limit of $5,000. Click here to calculate the required bond amount for your customer’s agency.
How Do New Mexico Collection Agencies File Their Bond?
New Mexico collection agencies 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 collection agency. The surety company should include the following information on the bond form:
- Name and address of entity/individual(s) buying the bond
- Surety company’s name, address, and state of incorporation
- Date the bond goes into effect
- Bond amount
- Date the bond is signed
What Can New Mexico Collection Agencies Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, collection agencies in New Mexico 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
What Other Insurance Products Can Agents Offer Collection Agencies in New Mexico?
New Mexico 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 New Mexico Collection Agency Customers?
The NMLS conveniently provides a public database to search for active collection agencies in New Mexico. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.