Pennsylvania Consumer Discount Company Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain Pennsylvania Consumer Discount Company Bonds
At a Glance:
- Lowest Cost: $100 per year or $10 per month based on the applicant’s credit
- Bond Amount: $5,000
- Who Needs it: All consumer discount companies operating in Pennsylvania
- Purpose: To ensure the public will receive compensation for any damages should the consumer discount company violate licensing law
- Who Regulates Consumer Discount Companies In Pennsylvania: The Pennsylvania Department of Banking and Securities
Background
The Pennsylvania Consumer Discount Company Act requires all consumer discount companies operating in the state to obtain a license with the Department of Banking and Securities. The Pennsylvania legislature enacted the licensing laws and regulations to ensure that consumer discount companies engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, consumer discount companies must purchase and maintain a $5,000 surety bond to be eligible for licensure.
What is the Purpose of the Pennsylvania Consumer Discount Company Bond?
Pennsylvania requires consumer discount companies 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 consumer discount company fails to comply with the regulations set forth in the Pennsylvania Consumer Discount Company Act. Specifically, the bond protects the public in the event the consumer discount 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 consumer discount company breaks licensing laws.
How Can an Insurance Agent Obtain a Pennsylvania Consumer Discount Company Surety Bond?
BondExchange makes obtaining a Pennsylvania Consumer Discount Company Bond easy. Simply login to your account and use our keyword search to find the “consumer” 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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Is a Credit Check Required for the Pennsylvania Debt Management Company Bond?
Surety companies will run a credit check on the owners of the debt management company to determine eligibility and pricing for the Pennsylvania Debt Management Company 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 Pennsylvania Consumer Discount Company Bond Cost?
The Pennsylvania Consumer Discount Company Bond can cost anywhere between $100 to $375 per year or $10 to $38 per month. 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 $5,000 bond requirement.
$5,000 Consumer Discount Company Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 650+ | $100 | $10 |
| 600 – 649 | $200 | $20 |
| 550 – 599 | $375 | $38 |
How Does Pennsylvania Define “Consumer Discount Company?”
To paraphrase the Pennsylvania Consumer Discount Company Act, a consumer discount company is any business entity who makes loans or advances of money on credit of an amount that is $25,000 or less.
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 Consumer Discount Companies Apply for a License in Pennsylvania
Consumer discount companies in Pennsylvania must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the licensing statutes for details on the process.
License Period – The Pennsylvania Consumer Discount Company License expires on June 1 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Consumer discount companies must purchase and maintain a $5,000 surety bond
Step 2 – Meet the Net Worth Requirements
Applicants for the Pennsylvania Consumer Discount Company License must have a company net worth (assets – liabilities) of at least $75,000, plus another $25,000 per additional office location. Applicants must submit a company financial statement, prepared by a CPA, verifying their net worth when submitting their license application.
Step 3 – Establish a Place of Business and Hire a Manager
Consumer Discount Companies must establish at least one office location and hire a minimum of one full time employee who is capable of handling the day to day operations of the company
Step 4 – Complete the Application
All Pennsylvania Consumer Discount Company License applications must be completed electronically here. Consumer discount companies must complete the application in its entirety, and pay a $500 application fee.
How Do Pennsylvania Consumer Discount Companies Renew Their License?
Consumer discount companies can renew their license online here. License holders need to simply login to their account to access their renewal application. The Pennsylvania Consumer Discount Company License expires on June 1 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Pennsylvania Consumer Discount Company License?
Pennsylvania does not require consumer discount companies to purchase any form of liability insurance as a prerequisite to obtaining a business license. Consumer discount companies must purchase and maintain a $5,000 surety bond.
How Do Pennsylvania Consumer Discount Companies File Their Bond?
Consumer discount companies 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 consumer discount company. The surety company should include the following information on the bond form:
- Name, address, and phone number of entity/individual(s) buying the bond
- Surety company’s name, address, and phone number
- Date the bond is signed
- Date the bond goes into effect
What Can Pennsylvania Consumer Discount Companies Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, consumer discount companies in Pennsylvania must ensure that they follow all license regulations in the state, including some of the most important issues below that tend to cause claims:
- Do not engage in any acts of fraud
- Do not breach any contracts made with consumers
- Pay all required taxes and fees
What Other Insurance Products Can Agents Offer Consumer Discount Companies in Pennsylvania?
Pennsylvania does not require consumer discount companies 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 other types of 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 Pennsylvania Consumer Discount Company Customers?
Pennsylvania conveniently provides a public database to search for active consumer discount companies 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.