Pennsylvania Credit Services Organization Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain Pennsylvania Credit Services Organization Bonds
At a Glance:
- Lowest Cost: 1% of the bond amount per year based on the applicant’s credit
- Bond Amount: Between $5,000 to $25,000 (more on this later)
- Who Needs it: All credit services organizations (CSOs) operating in Pennsylvania
- Purpose: To ensure the public will receive compensation for any damages should the credit services organization violate licensing law
- Who Regulates Credit Services Organizations In Pennsylvania: The Pennsylvania Department of State
Background
The Pennsylvania Credit Services Act requires all credit services organizations operating in the state to file a surety bond with the Department of State. The Pennsylvania legislature enacted the bonding requirement to ensure that credit services organizations engage in ethical business practices. There is no statewide licensing requirement for Pennsylvania Credit Services Organizations, however, CSOs may need to obtain a local business license and should consult their local municipal authority prior to conducting business.
What is the Purpose of the Pennsylvania Credit Services Organization Bond?
Pennsylvania requires credit services organizations to purchase a surety bond prior to engaging in business activities. The bond ensures that the public will receive compensation for financial harm if the credit services organization fails to comply with the regulations set forth in the Pennsylvania Credit Services Act. Specifically, the bond protects the public in the event the credit services organization 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 credit services organization breaks licensing laws.
How Can an Insurance Agent Obtain a Pennsylvania Credit Services Organization Surety Bond?
BondExchange makes obtaining a Pennsylvania Credit Services Organization Bond easy. Simply login to your account and use our keyword search to find the “credit” 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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How is the Bond Amount Determined?
The Pennsylvania Credit Services Act dictates that the limit on the credit services organization bond must equal 5% of the fees charged to consumers within the past 12 months. The bond must be a minimum of $5,000 and may not be less than $25,000
Is a Credit Check Required for the Pennsylvania Credit Services Organization Bond?
Surety companies will run a credit check on the owners of the credit services organization to determine eligibility and pricing for the Pennsylvania Credit Services Organization 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 Credit Services Organization Bond Cost?
The Pennsylvania Credit Services Organization Bond can cost anywhere between 1% 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 $10,000 bond requirement.
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $100 | $10 |
| 625 – 799 | $150 | $15 |
| 575 – 624 | $375 | $38 |
| 450 – 574 | $500 | $50 |
How Does Pennsylvania Define “Credit Services Organization?”
The Pennsylvania Credit Services Act defines a credit services organization as any business entity who provides one or more of the following services
- Improves a consumer’s credit record, history, or rating
- Obtains an extension of credit for a consumer
Exemptions to this definition include:
- Licensed lenders
- Banks and similar financial institutions
- Non-profit organizations
- Licensed real estate brokers
- Licensed attorneys
- Broker-dealers registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission
- Consumer reporting agencies
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.
Do Pennsylvania Credit Services Organizations Need to Obtain a License?
There is no statewide licensing requirement for credit services organizations in Pennsylvania. However, certain localities may require CSOs to obtain a local business license or tax certificate. CSOs should check with their local municipal authority prior to conducting business.
What Are the Insurance Requirements for the Credit Services Organizations in Pennsylvania?
Pennsylvania does not require credit services organizations to purchase any form of liability insurance as a prerequisite to conducting business. CSOs must purchase a surety bond with a limit ranging from $5,000 to $25,000 based on the annual amount of fees charged to consumers.
How Do Pennsylvania Credit Services Organizations File Their Bond?
Credit services organizations should mail the completed bond form, including the power of attorney, to the following address:
Department of State
Bureau of Corporations and Charitable Organizations
PO Box 8722
Harrisburg PA, 17105-8722
The credit services organization surety bond requires signatures from both the surety company that issues the bond and a representative from the CSO. 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 expires
- Date the bond is signed
What Can Pennsylvania Credit Services Organizations Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, credit services organizations 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
What Other Insurance Products Can Agents Offer Credit Services Organizations in Pennsylvania?
Pennsylvania does not require credit services organizations 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 Credit Services Organization Customers?
Pennsylvania unfortunately does not provide a public database of active credit services organizations in the state. We recommend contacting the Department of State or a list services company to obtain this information. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.