South Carolina Credit Counseling Organization Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain South Carolina Credit Counseling Organization Bonds
At a Glance:
- Lowest Cost: 1% of the bond amount per year based on the applicant’s credit
- Bond Amount: Minimum of $25,000 (more on this later)
- Who Needs it: All credit counseling organizations operating in South Carolina
- Purpose: To ensure the public will receive compensation for any damages should the credit counseling organization violate licensing law
- Who Regulates Credit Counseling Organizations In South Carolina: The South Carolina Department of Consumer Affairs
Background
South Carolina statute 37-7-102 requires all credit counseling organizations operating in the state to obtain a license with the Department of Consumer Affairs. The South Carolina legislature enacted the licensing laws and regulations to ensure that credit counseling organizations engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, credit counseling organizations must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the South Carolina Credit Counseling Organization Bond?
South Carolina requires credit counseling organizations 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 credit counselor fails to comply with the regulations set forth in the South Carolina Consumer Credit Counseling Act. Specifically, the bond protects the public in the event the credit counselor engages in any acts of fraud or fails to faithfully account for all funds collected from consumers. In short, the bond is a type of insurance that protects the public if the credit counseling organization breaks licensing laws.
How Can an Insurance Agent Obtain a South Carolina Credit Counseling Organization Surety Bond?
BondExchange makes obtaining a South Carolina Credit Counseling Organiztion 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?
South Carolina statute 37-7-103 requires that the limit on the credit counseling organization bond be equal to the amount of SC clients’ funds held in the company trust account at the time of renewal, or $25,000, whichever is greater.
Is a Credit Check Required for the South Carolina Credit Counseling Organization Bond?
Surety companies will run a credit check on the owners of the credit counseling organization to determine eligibility and pricing for the South Carolina Credit Counseling 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 South Carolina Credit Counseling Organization Bond Cost?
The South Carolina Credit Counseling 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 $25,000 bond requirement.
$25,000 Credit Counseling Organization Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $500 | $50 |
| 625 – 799 | $750 | $75 |
| 575 – 624 | $1,875 | $188 |
| 450 – 574 | $2,500 | $250 |
How Does South Carolina Define “Credit Counseling Organization?”
South Carolina statute 37-7-101 defines a credit counseling organization as any business entity who provides one or more of the following services:
- Distributes consumer funds to creditors of the consumer
- Improves a consumer’s credit record, history, or rating
- Negotiates with a consumer’s creditors for the purpose of deferring or reducing a consumer’s debt obligations
Exemptions to this definition include:
- Attorneys
- Banks, credit unions, and other similar financial institutions
- Certified public accountants
- Title insurers and abstract companies doing escrow business
- Judicial officers acting under a court order
- Nonprofit faith-based organizations
- Counselors certified by the South Carolina Housing Authority
- Mortgage brokers, real estate brokers, salesmen, and licensed property managers
- 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.
How Do Credit Counseling Organizations Apply for a License in South Carolina
Credit counseling organizations in South Carolina must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the application instructions for details on the process.
License Period – The South Carolina Credit Counseling Organization License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Credit counseling organizations must purchase and maintain a surety bond (limits outlined above)
Step 2 – Complete the Application
All South Carolina Credit Counseling Organization License applications can be completed online here. Credit counselors must complete the application in its entirety, and submit the following items:
-
- Company financial statements
- Description of the organization’s consumer education program
- Sample contract used with consumers
- Copy of the company’s standard debt management plan
- Copy of the company’s budget analysis form (if applicable)
- Copy of the company’s creditor consent form
- Copy of the company’s fee schedule
- Company formation documents
- Evidence of registration with the South Carolina Secretary of State
Credit counselors must pay a $100 application fee (per office location) and a $50 investigation fee when submitting their license application.
How Do South Carolina Credit Counseling Organizations Renew Their License?
Credit counseling organizations can renew their license online here. The South Carolina Credit Counseling Organization License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the South Carolina Credit Counseling Organization License?
South Carolina does not require credit counseling organizations to purchase any form of liability insurance as a prerequisite to obtaining a business license. Credit counseling organizations must purchase and maintain a surety bond (limits outlined above).
How Do South Carolina Credit Counseling Organizations File Their Bond?
Credit counselors 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 credit counseling organization. The surety company should include the following information on the bond form:
- Name of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond is signed
What Can South Carolina Credit Counseling Organizations Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, credit counseling organizations in South Carolina 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
- Faithfully account for all funds received from consumers
What Other Insurance Products Can Agents Offer Credit Counselors in South Carolina?
South Carolina does not require credit counseling 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 South Carolina Credit Counselor Customers?
South Carolina conveniently provides a public database to search for active credit counseling organizations 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.