Rhode Island Debt Management Services Bond: A Comprehensive Guide
August 20, 2021
This guide provides information for insurance agents to help their customers obtain Rhode Island Debt Management Services Bonds
At a Glance:
- Average Cost: Between $750 to $2,500 per year based on the applicant’s credit
- Bond Amount: $50,000
- Who Needs it: All debt management companies operating in Rhode Island
- Purpose: To ensure the public will receive compensation for any damages should the debt management company violate registration law
- Who Regulates Debt Management Companies In Rhode Island: The Rhode Island Department of Business Regulation
Rhode Island statute 19-14.8-4 requires all debt management companies operating in the state to register with the Department of Business Regulation. The Rhode Island legislature enacted the registration laws and regulations to ensure that debt managers engage in ethical business practices. In order to provide financial security for the enforcement of the registration law, debt managers must purchase and maintain a surety bond to be eligible for registration.
What is the Purpose of the Rhode Island Debt Management Services Bond?
Rhode Island requires debt management companies to purchase a surety bond as part of the application process to obtain a business registration. The bond ensures that the public will receive compensation for financial harm if the debt management company fails to comply with the regulations set forth in the Rhode Island Debt Management Services Act. Specifically, the bond protects the public in the event the debt manager 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 management company breaks registration laws.
How Can an Insurance Agent Obtain a Rhode Island Debt Management Services Surety Bond?
BondExchange makes obtaining a Rhode Island Debt Management Services 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? 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.
Is a Credit Check Required for the Rhode Island Debt Management Services Bond?
Surety companies will run a credit check on the owners of the debt management company to determine eligibility and pricing for the Rhode Island Debt Management Services 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 Rhode Island Debt Management Services Bond Cost?
The Rhode Island Debt Management Services Bond can cost anywhere between $750 to $2,500 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 $25,000 bond requirement.
$50,000 Debt Management Services Bond Cost
|Credit Score||Bond Cost (1 year)|
|650 – 799||$1,000|
|600 – 649||$2,000|
|450 – 599||$2,500|
How Does Rhode Island Define “Debt Management Company?”
Rhode Island statute 19-14.8-2 defines a debt management company as any business entity who acts as an intermediary between a debtor and creditor for the purpose of obtaining credit concessions benefiting the debtor.
How Do Debt Management Companies Apply for Registration in Rhode Island
Debt management companies in Rhode Island must navigate several steps to secure their registration. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.
Registration Period – The Rhode Island Debt Management Services Registration expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Debt management companies must purchase and maintain a $50,000 surety bond
Step 2 – Purchase Insurance
Debt managers are required to obtain fidelity insurance coverage with a minimum limit of $250,000 with a deductible of $10,000 or less
Step 3 – Request a NMLS Account
The Rhode Island Debt Management Services Registration application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a registration application, applicants must first request to obtain an NMLS account.
Step 4 – Complete the Application
- Audited company financial statements
- Certificate of good standing
- Proof of non-profit status (if applicable)
- Schedule E accreditation confirmation
- List of all jurisdictions the company is or has been authorized to perform debt management services within the last 5 years
- Description of the company’s financial analysis and initial budget plan
- Samples of all agreement forms used with Rhode Island consumers
- List of all company owners with a 10% stake or higher
- Statement disclosing the compensation for the company’s 5 highest paid employees in the last 3 years
- Evidence that all company counselors are certified or will be certified within 12 months after submitting the application
- Description of the company’s 3 most commonly used educational programs
- Company business plan
Debt management companies must pay a $300 fee when submitting their registration application.
How Do Rhode Island Debt Management Companies Renew Their Registration?
Debt management companies can renew their registration online through the NMLS. Registration holders need to simply login to their account to access their renewal application. The Rhode Island Debt Management Services Registration expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Rhode Island Debt Management Company Registration?
Debt managers are required to obtain fidelity insurance coverage with a minimum limit of $250,000 with a deductible of $10,000 or less as a prerequisite to obtaining a business registration. Debt management companies must purchase and maintain a $50,000 surety bond.
How Do Rhode Island Debt Management Companies File Their Bond?
Debt management 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 management 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
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Rhode Island Debt Management Companies Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, debt management companies in Rhode Island must ensure that they follow all registration 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 Management Companies in Rhode Island?
Rhode Island requires debt management companies to purchase fidelity insurance coverage as a prerequisite to obtaining a business registration. Insurance agents can obtain a fidelity bond by contacting BondExchange.
How Can Insurance Agents Prospect for Rhode Island Debt Management Company Customers?
The NMLS conveniently provides a public database to search for active debt management companies in Rhode Island. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.