New York City Debt Collection Agency Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain New York Debt Collection Agency Bonds
At a Glance:
- Lowest Cost: $100 per year or $10 per month
- Bond Amount: $5,000
- Who Needs it: All debt collection agencies, who collect child support payments, serving residents of NYC, regardless of where the company is located
- Purpose: To ensure the public will receive compensation for any damages should the debt collection agency violate licensing law
- Who Regulates Debt Collection Agencies in New York City: The New York City Department of Consumer Affairs
New York City (NYC) administrative code 20-490 requires all debt collection agencies operating in the city to obtain a license with the Department of Consumer Affairs. The NYC legislature enacted the licensing laws and regulations to ensure that debt collection agencies engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, debt collection agencies who collect child support payments must purchase and maintain a $5,000 surety bond to be eligible for licensure.
What is the Purpose of the New York City Debt Collection Agency Bond?
NYC requires debt collection agencies who collect child support payments 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 collection agency fails to comply with the regulations set forth in NYC administrative code 20-494.1. Specifically, the bond protects the public in the event the collection agency engages in any acts of fraud or breaches any contracts made with consumers. 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 York City Collection Agency Surety Bond?
BondExchange makes obtaining a New York City 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? 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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Do all NYC Debt Collection Agencies Need to Purchase a Bond?
No, only debt collection agencies who collect child support payments must purchase a surety bond. Debt collection agencies who do not collect child support payments are exempt from the bonding requirement.
Is a Credit Check Required for the New York City Debt Collection Agency Bond?
No, a credit check is not required for the New York City Debt Collection Agency Bond. Because the bond is considered relatively low risk, the same rate is offered to all debt collection agencies in NYC regardless of their credit history.
How Much Does the New York City Debt Collection Agency Bond Cost?
The New York City Debt Collection Agency Bond costs just $100 per year or $10 per month.
How Does New York City Define “Debt Collection Agency?”
NYC administrative code 20-489 defines a debt collection agency as any business entity who collects unpaid debts on behalf of another entity or who purchases delinquent debts and seeks to collect it.
Exemptions to this definition include:
- Employees of a creditor
- Employees of the debt collection agency
- Company’s collection debts on behalf of an affiliate entity
- Individuals acting under court order
- Licensed attorneys
- Individuals acting under a fiduciary obligation or escrow agreement
- Non-profit organizations
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 Collection Agencies Apply For a License in New York City?
Debt collection agencies in New York must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the application form for details on the process.
License Period – The New York City Debt Collection Agency License is valid for two years from the date of issuance and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Debt collection agencies who collect child support payments must purchase and maintain a $5,000 surety bond
Step 2 – Complete the Application
All NYC Debt Collection Agency License applications can be completed online here. Debt collection agencies must submit the following items when applying for licensure:
- Business certificates obtained from the businesses place of origin
- Certificate of Authority (businesses incorporated outside of NY State only)
- Basic business license application
- Debt collection agency application
- Child support form
- Non-resident form (only for businesses located outside of NYC)
- Authority to grant affirmation
How Do New York Debt Collection Agencies Renew Their License?
Debt collection agencies can renew their license online here. The New York City Debt Collection Agency License is valid for two years from the date of issuance and must be renewed before the expiration date.
What Are the Insurance Requirements for the New York City Debt Collection Agency License?
New City does not require debt collection agencies to purchase any form of liability insurance as a prerequisite to obtaining a business license. Debt collection agencies who collect child support payments must purchase and maintain a $5,000 surety bond.
How Do New York City Debt Collection Agencies File Their Bond?
New York City Debt Collection Agencies should submit the completed bond form, including the power of attorney, electronically here. The surety bond requires signatures from both the surety company that issues the bond and a representative from the debt collection agency. The surety company should include the following information on the bond form:
- Name of entity/individual(s) buying the bond
- Surety company’s name and address
- Bond term
- Date the bond is signed
What Can New York City Debt Collection Agencies Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, debt collection agencies in New York City 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
- Do not breach any contracts made with consumers
What Other Insurance Products Can Agents Offer Debt Collection Agencies in New York City?
New York City does not require debt 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 York City Debt Collection Agency Customers?
New York City conveniently provides a public database to search for active debt collection agencies in the city. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.