South Dakota Money Lender Bond: A Comprehensive Guide
August 25, 2021
This guide provides information for insurance agents to help their customers obtain South Dakota Money Lender Bonds
At a Glance:
- Average Cost: Between 1.5% to 7.5% of the bond amount per year based on the applicant’s credit
- Bond Amount: $10,000 plus an additional $2,500 per branch location
- Who Needs it: All money lenders operating in South Dakota
- Purpose: To ensure the public will receive compensation for any damages should the money lender violate licensing law
- Who Regulates Money Lenders In South Dakota: The South Dakota Division of Banking
South Dakota statute 54-4-40 requires all money lenders operating in the state to obtain a license with the Division of Banking. The South Dakota legislature enacted the licensing laws and regulations to ensure that money lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, money lenders must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the South Dakota Money Lender Bond?
South Dakota requires money lenders 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 money lender fails to comply with the regulations set forth in South Dakota statute 54-4. Specifically, the bond protects the public in the event the money lender 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 money lender breaks licensing laws.
How Can an Insurance Agent Obtain a South Dakota Money Lender Surety Bond?
BondExchange makes obtaining a South Dakota Money Lender Bond easy. Simply login to your account and use our keyword search to find the “money” 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 South Dakota Money Lender Bond?
Surety companies will run a credit check on the owners of the lending company to determine eligibility and pricing for the South Dakota Money Lender 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 Dakota Money Lender Bond Cost?
The South Dakota Money Lender Bond can cost anywhere between 1.5% to 7.5% 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.
$10,000 Money Lender Bond Cost
|Credit Score||Bond Cost (1 year)|
|650 – 799||$200|
|600 – 649||$400|
|450 – 599||$750|
How Does South Dakota Define “Money Lender?”
To paraphrase South Dakota statute 54-4-36, a money lender is any business entity who lends money to consumers or who creates, holds, purchases, or acquires retail installment contracts.
How Do Money Lenders Apply for a License in South Dakota
Money lenders in South Dakota 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.
License Period – The South Dakota Money Lender License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Money lenders must purchase a surety bond with a limit of $10,000 plus an additional $2,500 per branch location
Step 2 – Request a NMLS Account
The South Dakota Money Lender 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 3 – Complete the Application
- Audited company financial statements prepared by a CPA
- Primary company and consumer complaint contacts
- Disclosure questions
- Company’s independently reviewed AML/BSA policy
- Company business plan containing the following information:
- Marketing strategies
- Target markets
- Fee schedule
- Operating structure
- Certificate of good standing
- The following company policies:
- Information Security
- Privacy of Consumer Financial Information
- Copies of all documents used throughout the company’s regular course of business
- Uniform consent to be sued
- Company formation documents
- Company management and organizational charts
- Detailed resumes for all control persons
Money lenders must pay the following fees when submitting their license application:
- $1,000 license fee
- $100 NMLS processing fee
- $15 credit report fee (per person)
How Do South Dakota Money Lenders Renew Their License?
Money lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The South Dakota Money Lender License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the South Dakota Money Lender License?
South Dakota does not require money lenders to purchase any form of liability insurance as a prerequisite to obtaining a business license. Money lenders must purchase a surety bond with a limit of $10,000 plus an additional $2,500 per branch location.
How Do South Dakota Money Lenders File Their Bond?
Money lenders 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 lending 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 and address
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can South Dakota Money Lenders Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, money lenders in South Dakota 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 Money Lenders in South Dakota?
South Dakota does not require money lenders 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 Dakota Money Lender Customers?
The NMLS conveniently provides a public database to search for active money lenders in South Dakota. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.