Virginia Credit Services Bond: A Comprehensive Guide

August 30, 2021

Virginia Credit Services Bond

This guide provides information for insurance agents to help their customers obtain Virginia Credit Services Bonds

At a Glance:

  • Average Cost: Between 1% to 5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: Between $5,000 to $50,000 (more on this later)
  • Who Needs it: All credit services businesses operating in Virginia
  • Purpose: To ensure the public will receive compensation for any damages should the credit services business fail to comply with registration law
  • Who Regulates Credit Services Businesses In Virginia: The Virginia Department of Agriculture and Consumer Affairs

Background

Virginia statute 59.1-335.3 requires all credit services businesses operating in the state to register with the Department of Agriculture and Consumer Affairs. The Virginia legislature enacted the registration laws and regulations to ensure that credit services businesses engage in ethical business practices. To provide financial security for the enforcement of the registration law, credit services businesses must purchase and maintain a surety bond to be eligible for registration.

What is the Purpose of the Virginia Credit Services Bond?

Virginia requires credit services businesses 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 credit services business fails to comply with the regulations set forth in the Virginia Credit Services Businesses Act. Specifically, the bond protects the public in the event the credit services business 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 credit services business breaks registration laws.

Virginia Credit Services Bond Form

Virginia Credit Services Bond Form

How Can an Insurance Agent Obtain a Virginia Credit Services Surety Bond?

BondExchange makes obtaining a Virginia Credit Services 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? 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 Determined?

Virginia statute 59.1-335.4 dictates that the limit on the credit services bond must be equal to 100 times the standard fee charged to consumers. The bond must be a minimum of $5,000 and may not exceed $50,000.

Is a Credit Check Required for the Virginia Credit Services Bond?

Surety companies will run a credit check on the owners of the credit services business to determine eligibility and pricing for the Virginia Credit 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 Virginia Credit Services Bond Cost?

The Virginia Credit Services surety bond can cost anywhere between 1% to 5% of the bond amount per year. Insurance companies determine the rate based on several 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 Credit Services Bond Cost

Credit Score Bond Cost (1 year)
800+ $100
625 – 799 $150
575 – 624 $375
450 – 574 $500

How Does Virginia Define “Credit Services Business?”

Virginia statute 59.1-335.2 defines a credit services business as any business entity that performs one or more of the following business activities:

  • Improves a consumer’s credit record, history, or rating
  • Obtains an extension of credit for a consumer

Exemptions to this definition include:

  • Businesses authorized to make loans or extensions of credit
  • Financial institutions whose deposits are eligible for insurance by any credit union
  • Non-profit organizations
  • Real estate brokers
  • Licensed attorneys
  • Broker-dealers registered with the Securities Exchange Commission or the Commodity Futures Trading Commission
  • Consumer reporting agencies
  • Persons selling consumer goods who help the buyer obtain a loan

How do Credit Services Businesses Apply for Registration in Virginia?

Credit services businesses in Virginia must navigate several steps to secure their registration. Below are the general guidelines, but applicants should refer to the application guidelines for details on the process.

Registration Period – The Virginia Credit Services Registration will not expire unless surrendered, suspended, or revoked

Step 1 – Purchase a Surety Bond

Credit services businesses must purchase and maintain a surety bond (limits outlined above)

Step 2 – Complete the Application

All Virginia Credit Services Registration applications should be mailed to the following address:

Virginia Department of Agriculture and Consumer Services
PO Box 526
Richmond, VA 23218-0526

Credit services businesses must complete the application in its entirety, and submit the following items:

    • Information statement (see here for details)
    • Copies of all contracts used with consumers
    • $100 registration fee

Do Virginia Credit Services Businesses Need to Renew Their Registration?

No, because the Virginia Credit Services Registration will not expire unless surrendered, suspended, or revoked

What Are the Insurance Requirements for the Virginia Credit Services Business Registration?

The State of Virginia does not require credit services businesses to obtain any form of liability insurance as a prerequisite to obtaining a business registration. Credit services businesses must purchase and maintain a surety bond (limits outlined above).

How Do Virginia Credit Services Businesses File Their Bond?

Virginia credit services businesses should mail the completed bond form, including the power of attorney, to the following address:

Virginia Department of Agriculture and Consumer Services
PO Box 526
Richmond, VA 23218-0526

The Virginia credit services surety bond requires signatures from both the surety company that issues the bond and a representative from the credit services business. The surety company should include the following information on the bond form:

  • Legal name and address of entity/individual(s) buying the bond
  • Surety company’s name and address
  • Bond amount
  • Date the bond is signed
  • Date the bond goes into effect

What Can Virginia Credit Services Businesses Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, credit services businesses in Virginia must 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 Credit Services Businesses in Virginia?

Virginia does not require credit services businesses to purchase any form of liability insurance as a prerequisite to obtaining a registration. 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 Virginia Credit Services Businesses Customers?

Virginia conveniently provides a public database to search for active credit services businesses 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.

2021-12-29T09:35:49-05:00