North Dakota Deferred Presentment Service Provider Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain North Dakota Deferred Presentment Service Provider Bonds
At a Glance:
- Lowest Cost: $200 per year or $20 per month based on the applicant’s credit
- Bond Amount: Based on the payday lenders annual high receivables amount:
Table 1.1
| High Receivables Amount | Bond Amount |
|---|---|
| Less than $100,000 | $20,000 |
| $100,000 to $250,000 | $50,000 |
| Greater than $250,000 | $75,000 |
- Who Needs it: All payday lenders operating in North Dakota
- Purpose: To ensure the public will receive compensation for any damages should the payday lender engage in any acts of fraud
- Who Regulates Payday Lenders in North Dakota: The North Dakota Department of Financial Institutions
Background
North Dakota statute 13-08-2 requires all payday lenders operating in the state to obtain a license with the Department of Financial Institutions. The North Dakota legislature enacted the licensing laws and regulations to ensure that payday lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, payday lenders must purchase and maintain a surety bond to be eligible for licensure.
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What is the Purpose of the North Dakota Deferred Presentment Service Provider Bond?
North Dakota requires payday lenders 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 payday lender fails to comply with the regulations set forth in the North Dakota statute Chapter 13-08. Specifically, the bond protects the public in the event the payday lender 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 payday lender breaks licensing laws.
How Can an Insurance Agent Obtain a North Dakota Deferred Presentment Service Provider Bond?
BondExchange makes obtaining a North Dakota Deferred Presentment Service Provider Bond easy. Simply login to your account and use our keyword search to find the “deferred” 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.
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.
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Is a Credit Check Required for the North Dakota Deferred Presentment Service Provider Bond?
Surety companies will run a credit check on the owners of the payday lending company to determine eligibility and pricing for the North Dakota Deferred Presentment Service Provider 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 Dakota Deferred Presentment Service Provider Bond Cost?
The North Dakota Deferred Presentment Service Provider 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 $20,000 bond requirement.
$20,000 Deferred Presentment Service Provider Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 720+ | $200 | $20 |
| 680 – 719 | $300 | $30 |
| 650 – 679 | $400 | $40 |
| 600 – 649 | $800 | $80 |
| 550 – 599 | $1,500 | $150 |
| 500 – 549 | $2,500 | $250 |
Who is Required to Obtain a License?
North Dakota statute 13-08-01 requires all individuals and businesses who provide one or more of the following services to obtain a Deferred Presentment Service Provider License:
- Pays to a customer the amount of a check, minus any fees, and accepts a check from the customer dated on the date of the transaction and agrees to hold the check for a period of time before negotiation or presentment
- Accepts a check dated after the date of the transaction and agrees to hold the check for deposit until the date written on the check
- Pays to the customer an agreed-upon amount, and obtains the customer’s authorization to transfer or withdraw, electronically or otherwise, funds from a customer’s account in repayment at some future, agreed-upon date
Businesses who provide any of the above services are commonly referred to as payday lenders.
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 Payday Lenders Apply For a License in North Dakota?
Payday lenders in North Dakota 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 Dakota Deferred Presentment Service Provider License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Meet the Net Worth Requirements
Applicants for the North Dakota Deferred Presentment Service Provider License must have a company net worth (assets – liabilities) of at least $25,000. Applicants must submit a financial statement verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Payday lenders must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 3 – Hire a Qualifying Individual
License applicants must employ a qualifying individual who is capable of handling the day to day operations of the payday lending business. It is recommended that the qualifying individual be placed in a managerial role and have a minimum of three years industry experience.
Step 4 – Request a NMLS Account
The North Dakota Deferred Presentment Service Provider 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
All North Dakota Deferred Presentment Service Provider License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Company financial statements indicating a net worth of at least $25,000
- The following company contacts:
- Primary
- Primary consumer complaint
- Legal
- Pre-Exam Contact
- Exam Delivery/Billing
- Licensing
- Bank account information for the company’s letter/line of credit, operating, and/or trust primary account(s)
- Disclosure questions
- Company’s IT/Cybersecurity Policy
- Company business plan containing the following information:
- Executive Summary (Overview)
- Marketing strategies/Target markets
- Products/Services
- Management/Organization structure and corporate history
- Sources of income generation
- Certificate of Good Standing
- Sample written agreements and disclosure statements used in North Dakota payday lending transactions
- Company formation documents
- Management chart detailing the company’s hierarchy
- Organization chart detailing the company’s ownership structure
- Personal financial statements of all company owner’s with at least a 25% stake
- Photograph of the interior and exterior of the company’s primary business location (email images here)
Payday lenders must pay the following fees when submitting their license application:
-
- $450 license fee
- $400 application fee
- $36.25 background check fee (per person)
- $15 credit report fee (per person)
How Do North Dakota Payday Lenders Renew Their License?
Payday lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The North Dakota Deferred Presentment Service Provider License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the North Dakota Deferred Presentment Service Provider License?
North Dakota does not require payday lenders to purchase any form of liability insurance as a prerequisite to obtaining a business license. Payday lenders must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do North Dakota Payday Lenders File Their Bond?
Payday lenders 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 payday lending company. 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 state of incorporation
- Bond amount
- Date the bond goes into effect
What Can North Dakota Payday Lenders Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, payday lenders in North Dakota 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
- Do not charge unnecessary fees
What Other Insurance Products Can Agents Offer Payday Lenders in North Dakota?
North Dakota does not require payday lenders 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 Dakota Payday Lender Customers?
The NMLS conveniently provides a public database to search for active payday lenders in North Dakota. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.