Wisconsin Collection Agency Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Wisconsin Collection Agency Bond
At a Glance:
- Lowest Cost: 0.75% of the bond amount per year based on the applicant’s credit
- Bond Amount:
- $25,000 if all company records are maintained in Wisconsin
- $35,000 if any company records are maintained outside of Wisconsin
- Who Needs it: All collection agencies operating in Wisconsin
- Purpose: To ensure the public will receive compensation for any damages should the collection agency fail to comply with licensing law
- Who Regulates Collection Agencies In Wisconsin: The Wisconsin Department of Financial Institutions
Background
Wisconsin statute 218.04(2) requires all collection agencies operating in the state to obtain a license with the Department of Financial Institutions. The Wisconsin legislature enacted the licensing laws and regulations to ensure that collection agencies engage in ethical business practices. To provide financial security for the enforcement of the licensing law, collection agencies must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Wisconsin Collection Agency Bond?
Wisconsin requires collection agencies 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 collection agency fails to comply with the licensing regulations outlined in Wisconsin statute 218.04(3). Specifically, the bond protects the public in the event the collection agency engages in any acts of fraud or fails to pay funds owed to collectors. In short, the bond is a type of insurance that protects the public if the collection agency breaks licensing laws.
How Can an Insurance Agent Obtain a Wisconsin Collection Agency Surety Bond?
BondExchange makes obtaining a Wisconsin Collection Agency Bond easy. Simply login to your account and use our keyword search to find the “collection” 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.
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.
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Is a Credit Check Required for the Wisconsin Collection Agency Bond?
Surety companies will run a credit check on the owners of the collection agency to determine eligibility and pricing for the Wisconsin Collection Agency 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 Wisconsin Collection Agency Bond Cost?
The Wisconsin Collection Agency surety bond can cost anywhere between 0.75% 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 both the $25,000 and $35,000 bond requirements.
$25,000 Collection Agency Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 700+ | $188 | $19 |
| 650 – 699 | $250 | $25 |
| 625 – 649 | $313 | $32 |
| 600 – 624 | $470 | $47 |
| 550 – 599 | $1,000 | $100 |
| 500 – 549 | $1,250 | $125 |
$35,000 Collection Agency Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 700+ | $263 | $27 |
| 650 – 699 | $350 | $35 |
| 625 – 649 | $438 | $44 |
| 600 – 624 | $658 | $66 |
| 550 – 599 | $1,400 | $140 |
| 500 – 549 | $1,750 | $175 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
How Does Wisconsin Define “Collection Agency?”
To paraphrase Wisconsin statute 218.04(1)(a), a collection agency is any business entity who collects debt on behalf of another person or entity.
Exemptions to this definition include:
- Licensed attorneys
- Banks
- Express companies
- Health care billing companies
- State savings banks
- State savings and loan associations
- Insurers and their agents
- Trust companies
- Real estate brokers and salespersons
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 Collection Agencies Apply for a License in Wisconsin?
Collection agencies in Wisconsin must navigate several steps to secure their license. Below are the general guidelines, but license applicants should refer to the application guidelines for details on the process.
License Period – The Wisconsin Collection Agency License expires on June 30 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Collection agencies must purchase and maintain a surety bond with the following limit:
-
- $25,0000 if all company records are maintained in Wisconsin
- $35,000 if any company records are maintained outside of Wisconsin
Step 2 – Complete the Application
All Wisconsin Collection Agency License applications should be mailed to the following address:
PO Box 7876
Madison, Wisconsin 53707-7876
Applicants must complete entire the application, and submit the following items:
-
- Financial Statements – Must show a minimum net worth (assets – liabilities) of $15,000 and a minimum working capital (current assets – current liabilities) of $7,500.
- Solicitor Collector Application – Any solicitor or collector who will be working outside of the office must complete a solicitor/collector application.
- List of Solicitors/Collectors – Provide a list of all solicitors/collectors who will not be working outside of the office but will be using an alias when contacting Wisconsin residents. The list should identify each solicitor’s/collector’s alias.
- Certificate of Good Standing – If the applicant is organized or incorporated in a state other than Wisconsin, provide the division with a certificate of status/certificate of good standing from the state where the applicant is organized or incorporated
- Criminal History Report – A criminal history report must be submitted for each individual who owns 10% or more of the applicant and for each key officer, key member, or partner of the applicant.
- Officer/Director/Owner Resume(s) – Submit a resume for each individual who owns 10% or more of the company and for each key officer, director, key member, or partner of the applicant.
- Contracts between the Applicant and Independent Contractors – Attach a copy of each contract between the applicant and all independent contractors hired by the applicant.
- Business Plan – Submit a business plan if the applicant is not yet in operation, or a detailed description of the mode of operations if the applicant is currently operating. A business plan should include a description of the applicant’s proposed products and services, its management team, and its records.
Collection agencies must pay the following fees when submitting their license application:
-
- $200 license fee
- $1,200 investigation fee
- $15 annual license fee for each solicitor/collector who will be working outside of the office.
How Do Wisconsin Collection Agencies Renew Their License?
Collection agencies should mail their completed renewal application to the following address:
PO Box 7876
Madison, Wisconsin 53707-7876
The Wisconsin Collection Agency License expires on June 30 of each year and must be renewed before the expiration date
What Are the Insurance Requirements for the Wisconsin Collection Agency License?
Wisconsin does not require collection agencies to obtain any form of liability insurance as a prerequisite to obtaining a business license. Collection agencies must purchase and maintain a surety bond with the following limit:
- $25,0000 if all company records are maintained in Wisconsin
- $35,000 if any company records are maintained outside of Wisconsin
How Do Wisconsin Collection Agencies File Their Bond?
Collection agencies should mail the completed bond form, including the power of attorney, to the following address:
PO Box 7876
Madison, Wisconsin 53707-7876
The collection agency surety bond requires signatures from both the surety company that issues the bond and a representative from the collection agency. 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
- Date the bond goes into effect
- Witness signatures for both the principal and the surety
What Can Collection Agencies Do to Avoid Claims Against Their Bond?
To avoid claims being made against their bond, collection agencies in Wisconsin must follow all license regulations in the state, including some of the most important issues below that, tend to cause claims:
- Pay all funds owed to creditors
- Do not engage in any acts of fraud
What Other Insurance Products Can Agents Offer Collection Agencies in Wisconsin?
Wisconsin does not require collection agencies to obtain 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 Wisconsin Collection Agency Customers?
Wisconsin conveniently provides a public database to search for active collection agencies in the state. The database can be accessed here. Contact BondExchange for help developing a marketing piece. Agents can also leverage our print-mail relationships for discounted mailing service.