Utah Money Transmitter Bond: A Comprehensive Guide

August 27, 2021

Utah Money Transmitter Bond

This guide provides information for insurance agents to help their customers obtain Utah Money Transmitter 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: At least $50,000 (more on this later)
  • Who Needs it: All money transmitters operating in Utah
  • Purpose: To ensure the public will receive compensation for any damages should the money transmitter violate licensing law
  • Who Regulates Money Transmitters In Utah: The Utah Department of Commerce

Background

Utah statute 7-25-201 requires all money transmitters operating in the state to obtain a license with the Department of Financial Institutions. The Utah legislature enacted the licensing laws and regulations to ensure that money transmitters engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, money transmitters must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Utah Money Transmitter Bond?

Utah requires money transmitters 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 transmitter fails to comply with the regulations set forth in the Utah Money Transmitter Act. Specifically, the bond protects the public in the event the money transmitter engages in any acts of fraud or fails to transmit funds owed to consumers. In short, the bond is a type of insurance that protects the public if the money transmitter breaks licensing laws.

Utah Money Transmitter Bond Form

Utah Money Transmitter Bond Form

How Can an Insurance Agent Obtain a Utah Money Transmitter Surety Bond?

BondExchange makes obtaining a Utah Money Transmitter 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.

How is the Bond Amount Determined?

Utah statute 7-25-204 dictates that the limit on the money transmitter bond must be a minimum of $50,000. The Department of Financial Institutions has the authority to increase the required bond amount on a case by case basis if they believe it is necessary to ensure the protection of the public. When determining whether or not to increase the bond amount, the Department of Financial Institutions will examine factors such as the money transmitter’s financial responsibility and the yearly amount of funds transmitted to consumers.

Is a Credit Check Required for the Utah Money Transmitter Bond?

Surety companies will run a credit check on the owners of the money transmission company to determine eligibility and pricing for the Utah Money Transmitter 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 Utah Money Transmitter Bond Cost?

The Utah Money Transmitter 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 $50,000 bond requirement.

$50,000 Money Transmitter Bond Cost

Credit Score Bond Cost (1 year)
800+ $750
650 – 799 $1,000
600- 649 $2,000
500 – 599 $3,750

How Does Utah Define “Money Transmitter?”

Utah statute 7-25-102  defines a money transmitter as any business entity who sells or issues payment instruments or stored value, transmits money inside or outside the US by any means, or provides a bill paying service (except when an agent of a payee receives funds on behalf of the payee).

How do Money Transmitters Apply For a License in Utah?

Money Transmitters in Utah 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 Utah Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Money transmitters must purchase and maintain a surety bond with a minimum limit of $50,000

Step 2 – Meet the Net Worth Requirements

Applicants for the Utah Money Transmitter License must maintain a company net worth (assets – liabilities) of at least $1 million. Money transmitters must submit an audited company financial statement verifying their net worth when submitting their license application.

Step 3 – Request a NMLS Account

The Utah Money Transmitter 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 Utah Money Transmitter License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

    • Audited company financial statements indicating a net worth of at least $1 million
    • Locations of all company authorized agents
    • Primary company and consumer complaint contacts
    • Disclosure questions
    • Company’s independently reviewed AML/BSA policy
    • Company business plan containing the following information:
      • History of operations
      • Description of activities
      • Marketing strategies
      • Products
      • Target markets
      • Fee schedule
      • Operating structure
    • Certificate Good Standing
    • Sample contracts used with authorized agents
    • Sample of all payment instruments used
    • Organizational chart detailing the company’s ownership structure

Money transmitters must pay the following fees when submitting their license application:

  • $300 license fee
  • $0.25 annual fee for all company authorized agents (the first 100 agents are exempt)

How Do Utah Money Transmitters Renew Their License?

Money transmitters can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Utah Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Utah Money Transmitter License?

Utah does not require money transmitters to purchase any form of liability insurance as a prerequisite to obtaining a business license. Money transmitters must purchase and maintain a surety bond with a minimum limit of $50,000.

How Do Utah Money Transmitters File Their Bond?

Money transmitters 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 money transmission company. The surety company should include the following information on the bond form:

  • Name of entity/individual(s) buying the bond
  • Surety company’s name
  • Date the bond goes into effect
  • Date the bond is signed

What Can Utah Money Transmitters Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, money transmitters in Utah must follow all license regulations in the state, including some of the most important issues below that tend to cause claim

  • Do not engage in any acts of fraud
  • Pay all money owed to consumers

What Other Insurance Products Can Agents Offer Money Transmitters in Utah?

Utah does not require money transmitters 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 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.

How Can Insurance Agents Prospect for Utah Money Transmitter Customers?

The NMLS conveniently provides a public database to search for active money transmitters in Utah. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2021-12-29T09:39:40-05:00