Virginia Debt Management Service Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain Virginia Debt Management Service Bonds
At a Glance:
- Lowest Cost: $375 per year or $38 per month based on the applicant’s credit
- Bond Amount: $25,000
- Who Needs it: All debt management service providers operating in Virginia
- Purpose: To ensure the public will receive compensation for any damages should the debt management service provider fail to comply with licensing law
- Who Regulates Debt Management Service Providers In Virginia: The Virginia State Corporation Commission
Background
Virginia statute 6.2-2001. requires all debt management service providers operating in the state to obtain a license with the State Corporation Commission. The Virginia legislature enacted the licensing laws and regulations to ensure that debt management service providers engage in ethical business practices. To provide financial security for the enforcement of the licensing law, debt management service providers must purchase and maintain a $25,000 surety bond to be eligible for licensure. Debt managers in Virginia are commonly referred to as credit counselors. There is no specific “debt management service provider license” in Virginia, so debt managers will need to obtain a credit counseling license.
What is the Purpose of the Virginia Debt Management Service Bond?
Virginia requires debt management service providers 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 debt manager fails to comply with the regulations outlined in Virginia statutes Title 6.2 Chapter 20. Specifically, the bond protects the public in the event the debt manager engages in any acts of fraud or mishandles consumer funds. In short, the bond is a type of insurance that protects the public if the debt management service provider breaks licensing laws.
How Can an Insurance Agent Obtain a Virginia Debt Management Service Surety Bond?
BondExchange makes obtaining a Virginia Debt Management Service 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? 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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Is a Credit Check Required for the Virginia Debt Management Service Bond?
Surety companies will run a credit check on the owners of the debt management company to determine eligibility and pricing for the Virginia Debt Management Service 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 Debt Management Service Bond Cost?
The Virginia Debt Management Service bond can cost anywhere between $375 to $1,250 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 the $25,000 bond requirement.
$25,000 Debt Management Service Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $375 | $38 |
| 650 – 799 | $500 | $50 |
| 600 – 649 | $1,000 | $100 |
| 450 – 599 | $1,250 |
How Does Virginia Define “Debt Management Service Provider?”
To paraphrase Virginia statute 6.2-2000, a debt management service provider is any business entity who provides debt pooling and distribution services to consumers.
Debt managers are referred to as “credit counseling agencies” in Virginia.
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 Debt Management Service Providers Apply for License in Virginia?
Debt management service providers in Virginia must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the application form for details on the process.
License Period – The Virginia Credit Counseling Agency license will not expire unless surrendered, suspended, or revoked
Step 1 – Purchase a Surety Bond
Debt management services providers must purchase and maintain a $25,000 surety bond
Step 2 – Complete the Application
All Virginia Credit Counseling Agency License applications should be mailed to the following address:
Bureau of Financial Institutions
State Corporation Commission
1300 East Main Street, Suite 800
Post Office Box 640
Richmond, Virginia 23218-0640
Debt managers must complete the application in its entirety, and submit the following items:
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- Organizational chart detailing the company’s ownership structure
- Personal Financial Report and Disclosure Statement for each senior company officer
- Employment and Business Affiliation Disclosure for each company officer
- Financial report for all companies who own 10% or more of the business applying for licensure
- Company business plan
- Description of any fidelity insurance coverage
- Copy of the company’s standard debt management plan agreement
- Account information for all company trust accounts used to hold consumer funds
- Monthly estimate of funds received from Virginia consumers for the company’s first 2 years in business
- Names and experience of all company credit counselors
- Copy of the company’s accreditation certificate
- Authorization form
- Copies of all disclosure forms provided to consumers
- Evidence of registration with the Clerk of the State Corporation Commission
Debt management service providers must pay a $500 fee when submitting their license application.
Do Virginia Debt Management Service Providers Need to Renew Their License?
No, because the Virginia Credit Counseling Agency License will not expire unless surrendered, suspended, or revoked
What Are the Insurance Requirements for the Virginia Credit Counseling Agency License?
The State of Virginia does not require debt management service providers (credit counselors) to obtain any form of liability insurance as a prerequisite to obtaining a business license. Debt managers must purchase and maintain a $25,000 surety bond.
How Do Virginia Debt Management Service Providers File Their Bond?
Virginia debt management service providers should mail the completed bond form, including the power of attorney, to the following address:
Bureau of Financial Institutions
State Corporation Commission
1300 East Main Street, Suite 800
Post Office Box 640
Richmond, Virginia 23218-0640
The Virginia debt management service 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:
- Legal name of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond is signed
What Can Virginia Debt Management Service Providers Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, debt managers in Virginia must follow all license regulations in the state, including some of the most important issues below that, tend to cause claims:
- Do not mishandle consumer funds
- Do not purchase any debt or obligation of a consumer
- Do not lend money or provide credit to consumers
- Do not obtain a mortgage or other property security interest of a consumer
- Do not act as a debt collector
- Do not structure agreements that would result in any negative amortization of any of the consumer’s obligations to creditors
What Other Insurance Products Can Agents Offer Debt Management Service Providers in Virginia?
Virginia does not require debt management service providers to purchase any form of liability insurance as a prerequisite to obtaining a 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 Virginia Debt Management Service Provider Customers?
Virginia conveniently provides a public database to search for active debt management service providers 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.