Pennsylvania Debt Settlement Company Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain Pennsylvania Debt Settlement Company Bonds
At a Glance:
- Lowest Cost: $375 per year or $38 per month based on the applicant’s credit
- Bond Amount: $25,000
- Who Needs it: All debt settlement companies operating in Pennsylvania
- Purpose: To ensure the public will receive compensation for any damages should the debt settlement company violate licensing law
- Who Regulates Debt Settlement Companies In Pennsylvania: The Pennsylvania Department of Banking and Securities
Background
The Pennsylvania Debt Settlement Services Act requires all debt settlement 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 debt settlers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, debt settlers must purchase and maintain a $25,000 surety bond to be eligible for licensure.
What is the Purpose of the Pennsylvania Debt Settlement Company Bond?
Pennsylvania requires debt settlement 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 debt settlement company fails to comply with the regulations set forth in the Pennsylvania Debt Settlement Services Act. Specifically, the bond protects the public in the event the debt settler 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 debt settlement company breaks licensing laws.
How Can an Insurance Agent Obtain a Pennsylvania Debt Settlement Company Surety Bond?
BondExchange makes obtaining a Pennsylvania Debt Settlement Company Bond easy. Simply login to your account and use our keyword search to find the “debt” 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 Pennsylvania Debt Settlement Company Bond?
Surety companies will run a credit check on the owners of the debt settlement company to determine eligibility and pricing for the Pennsylvania Debt Settlement 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 Debt Settlement Company Bond Cost?
The Pennsylvania Debt Settlement Company Bond can cost anywhere between $375 to $1,250 per year or $38 to $125 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 the $25,000 bond requirement.
$25,000 Debt Settlement Company Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $375 | $38 |
| 650 – 799 | $500 | $50 |
| 600 – 649 | $1,000 | $100 |
| 450 – 599 | $1,250 | $125 |
How Does Pennsylvania Define “Debt Settlement Company?”
The Pennsylvania Debt Settlement Services Act defines a debt settlement company as any business entity who acts as an intermediary between a debtor and creditor and secures concessions from the creditor to lower the debtor’s debt obligations.
Exemptions to this definition include:
- Lawyers
- Accountants
- Financial planners
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 Settlement Companies Apply for a License in Pennsylvania
Debt settlement companies in Pennsylvania 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.
Non-profit organizations that provide debt settlement services and who charge annual fees that are less than $3,000,0000 will submit a separate application which can be found here. The applications are virtually identical, however, nonprofits are only required to pay a licensing fee of $500. The remainder of this section will focus on the application process for profit-driven organizations
License Period – The Pennsylvania Debt Settlement License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Debt settlement companies must purchase and maintain a $25,000 surety bond
Step 2 – Purchase Insurance
Pennsylvania requires debt settlement companies to purchase liability insurance or fidelity bond coverage. The recommended limit is $250,000.
Step 3 – Request an NMLS Account
The Pennsylvania Debt Settlement Company 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 Pennsylvania Debt Settlement Company License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
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- Company formation documents
- Account information for the company’s letter/line of credit, operating, and/or trust primary bank accounts
- Service of process form
- Audited company financial statements prepared by a CPA
- Company business plan containing the following information:
- Marketing strategy
- Products
- Target markets
- Operating structure
- Certificate of authority
- Sample debt settlement agreement used with consumers
- Company management and organizational charts
- Tax certification (per control person)
- List of all states the company is licensed to perform debt settlement services in
Debt settlement companies must pay a $2,500 fee when submitting their license application.
How Do Pennsylvania Debt Settlement Companies Renew Their License?
Debt settlement companies can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Pennsylvania Debt Settlement License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Pennsylvania Debt Settlement Company License?
Pennsylvania requires debt settlement companies to purchase either liability insurance or fidelity coverage as a prerequisite to obtaining a business license. The recommended limit is $250,000. Debt settlement companies must purchase and maintain a $25,000 surety bond.
How Do Pennsylvania Debt Settlement Companies File Their Bond?
Debt settlement companies 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 debt settlement 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
- Bond amount
- Date the bond is signed
What Can Pennsylvania Debt Settlement Companies Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, debt settlement 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
What Other Insurance Products Can Agents Offer Debt Settlement Companies in Pennsylvania?
Pennsylvania requires debt settlement companies to purchase either liability insurance or fidelity coverage as a prerequisite to obtaining a business license. 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. To obtain a fidelity bond, contact Bondexchange.
How Can Insurance Agents Prospect for Pennsylvania Debt Settlement Company Customers?
The NMLS conveniently provides a public database to search for active debt settlement companies in Pennsylvania. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.