North Carolina Money Transmitter Bond: A Comprehensive Guide

July 14, 2021

North Carolina Money Transmitter Bond

This guide provides information for insurance agents to help their customers obtain North Carolina Money Transmitter Bonds

At a Glance:

  • Average Cost: Between 1% to 12.5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: $150,000 for initial license applicants (more on this later)
  • Who Needs it: All money transmitters operating in North Carolina
  • Purpose: To ensure the public will receive compensation for any damages should the money transmitter fail to comply with licensing law
  • Who Regulates Money Transmitters in North Carolina: The North Carolina Commissioner of Banks Office

Background

North Carolina statute 58-208.43 requires all money transmitters operating in the state to obtain a license with the Commissioner of Banks Office. The North Carolina legislature enacted the licensing laws and regulations to ensure that money transmitters engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, money transmitters must purchase and maintain a $150,000 surety bond to be eligible for licensure.

What is the Purpose of the North Carolina Money Transmitter Bond?

North Carolina requires money transmitters 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 money transmitter fails to comply with the regulations set forth in the North Carolina Money Transmitters Act. Specifically, the bond protects the public in the event the money transmitter engages in any acts of fraud or fails to pay all funds owed to consumers. In short, the bond is a type of insurance that protects the public if the money transmitter breaks licensing laws.

North Carolina Money Transmitter Bond Form

North Carolina Money Transmitter Bond Form

How Can an Insurance Agent Obtain a North Carolina Money Transmitter Bond?

BondExchange makes obtaining a North Carolina Money Transmitter Bond easy. Simply login to your account and use our keyword search to find the “money” 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?

North Carolina statute 53-208.47 dictates that the limit on the money transmitter bond is $150,000 for all first time license applicants. When renewing their license, money transmitters in North Carolina will need to increase their bond amount to reflect their annual transmission volume, as outlined in the table below:

Total Annual Transmission Volume Bond Amount
$1 million or less $150,000
Between $1 million to less than $5 million $175,000
Between $5 million to less than $10 million $200,000
Between $10 million to less than $50 million $225,000
Greater than $50 million $250,000

Is a Credit Check Required for the North Carolina Money Transmitter Bond?

Surety companies will run a credit check on the owners of the money transmission company to determine eligibility and pricing for the North Carolina Money Transmitter 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 North Carolina Money Transmitter Bond Cost?

The North Carolina Money Transmitter Bond can cost anywhere between 1% to 12.5% 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 $150,000 bond requirement.

$150,000 Money Transmitter Bond Cost

Credit Score Bond Cost (1 year)
720+ $1,500
680 – 719 $2,250
650 – 679 $3,000
600 – 649 $6,000
550 – 599 $11,250
500 – 549 $18,750

How Does North Carolina Define “Money Transmitter?”

North Carolina statute 53-208.42 defines a money transmitter as any business entity who provides one or more of the following services:

  • Sells or issues payment instruments or stored value primarily for personal, family, or household purposes
  • Receives money or monetary value for transmission or holding funds incidental to transmission within the United States or to locations abroad by any and all means, including payment instrument, stored value, wire, facsimile, or electronic transfer, primarily for personal, family, or household purposes. This includes maintaining control of virtual currency on behalf of others.

How do Money Transmitters Apply For a License in North Carolina?

Money transmitters in North Carolina 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 North Carolina Money Transmitter License does not expire, however companies must annually renew their license by December 31 of each year

Step 1 – Meet the Net Worth Requirements

Applicants for the North Carolina Money Transmitter License must have a company net worth (assets – liabilities) of at least $250,000. Applicants must submit an audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

First time license applicants must purchase and maintain a $150,000 surety bond

Step 3 – Request a NMLS Account

The North Carolina Money Transmitter 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 North Carolina Money Transmitter License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

    • Audited company financial statements indicating a net worth of at least $250,000
    • Locations of all company authorized agents
    • Primary company and consumer complaint contact information
    • Company’s FinCEN registration confirmation number and filing date
    • Name, address and account number of of clearing bank(s) in which payment instruments will be drawn
    • Disclosure questions
    • Companies AML/BSA policy
    • Company business plan containing the following information:
      • Marketing strategies
      • Products
      • Target markets
      • Fee schedule
      • Operating structure
    • Certificate of Good Standing
    • The following document samples:
      • Authorized Agent Contract
      • Form of payment instrument with applicant name, address, phone number, and any applicable disclosures
    • Flow of funds structure
    • Company formation documents
    • Management chart detailing the company’s hierarchy
    • Organizational chart indicating the company’s ownership structure
    • List of company’s permissible investments
    • Resumes for all company executive officers

Money transmitters must pay the following fees when submitting their license application:

    • $1,500 license fee
    • $36.25 background check fee
    • $15 credit report fee
    • $0.25 annual fee for all authorized agents (the first 100 agents are exempt)

How Do North Carolina Money Transmitters Renew Their License?

Money transmitters can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The North Carolina Money Transmitter License does not expire, however companies must annually renew their license by December 31 of each year. When renewing their license, money transmitters in North Carolina will need to increase their bond amount to reflect their annual transmission volume, as outlined in the above section.

What Are the Insurance Requirements for the North Carolina Money Transmitter License?

North Carolina does not require money transmitters to obtain any form of liability insurance as a prerequisite to obtaining a business license. Money transmitters must purchase and maintain a surety bond (limits outlined above)

How Do North Carolina Money Transmitters File Their Bond?

Money transmitters 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 money transmission company. 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 and state of incorporation
  • Bond amount
  • Date the bond goes into effect
  • Date the bond is signed

What Can North Carolina Money Transmitters Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, money transmitters in North Carolina 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 consumers

What Other Insurance Products Can Agents Offer Money Transmitters in North Carolina?

North Carolina does not require money transmitters 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 North Carolina Money Transmitter Customers?

The NMLS conveniently provides a public database to search for active money transmitters in North Carolina. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2022-05-19T12:58:44-04:00