A collection agency bond, sometimes referred to as a consumer protection bond is a license surety bond that some states will require before a business can obtain a license to collect on accounts in that state. Collection agency bonds ensure that collection agencies adhere to all state’s laws and rules when collecting on accounts in the covered state.
Collection agency surety bonds involve three parties.
Collection agencies in many states will need a collection agency surety bond in order to receive their license to collect money in that state. Collection agency bonds are given on a state by state basis, so a company that wants to do business in multiple states will need a bond for each state they will collect money in. Collection agency bonds are renewed annually.
State governments require collection agency bonds/consumer protection bonds to provide a form of protection for the state’s citizens, and for the clients of collection agencies. The bonds exist to ensure that collection agencies follow industry regulations when collecting money, and to guarantee that they send the money they receive to the company that hired them to collect on outstanding debt (after deducting the collection fees).
The collection agency bond ensures that if a collection agency does not handle the funds they receive appropriately, the obligee can file a claim on the bond to be reimbursed. In that case, the collection agency will then reimburse the surety for any valid claims made on the bond.
Many states require bonds to be written for $10,000 or less, although certain states or municipalities may require a higher bonding amount.
Collection agency bonds are relatively inexpensive surety bonds. For example, $10,000 or less of coverage can cost as little as 1%. For higher bonding amounts, the cost rises a bit, depending on credit score and bonding amount.
Generally, clients with good credit can receive premium rates between 1% and 3%, and those with bad credit will pay a higher amount.
Collection agency bonds are generally easy and quick to process. Most bond requests can be completed with just a surety bond application and a credit check. Depending on the required bond amount and/or credit standing, there may be additional requirements.
At Viking, collection agency surety bond quotes are usually available the same day or within 24 hours of the application being filed. Viking has access to a program designed specifically to save clients money on collection agency bonds. Contact Viking today to get your collection agency surety bond quote.
Quotes are available for clients with low credit. In many cases, a bond is not out of reach simply due to bad credit.
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