Tennessee Money Transmitter Bond: A Comprehensive Guide

This guide provides information for insurance agents to help their customers obtain Tennessee Money Transmitter Bonds

At a Glance:

• Lowest Cost: 1.5% of the bond amount per year based on the applicant’s credit
• Bond Amount: $50,000 plus $10,000 per additional office location to a maximum of $800,000
• Who Needs it: All money transmitters operating in Tennessee
• Purpose: To ensure the public will receive compensation for any damages should the money transmitter violate licensing law
• Who Regulates Money Transmitters In Tennessee: The Tennessee Department of Financial Institutions

Background

Tennessee statute 45-7-102 requires all money transmitters operating in the state to obtain a license with the Commissioner of Financial Institutions. The Tennessee 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 Tennessee Money Transmitter Bond?

Tennessee 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 Tennessee statute 45-7. 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.

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

BondExchange makes obtaining a Tennessee 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? 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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How is the Bond Amount Determined?

The limit on the Tennessee money transmitter bond is $50,000. If the money transmitter conducts business at more than one location, through authorized agents or otherwise, then the amount of the bond must be increased by $10,000 per additional location, up to a maximum of $800,000.

Is a Credit Check Required for the Tennessee 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 Tennessee 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 Tennessee Money Transmitter Bond Cost?

The Tennessee 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

How Does Tennessee Define “Money Transmitter?”

Tennessee statute 45-7-103 defines a money transmitter as any business entity who sells or issues payment instruments or who receives money for transmission.

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 Money Transmitters Apply For a License in Tennessee?

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

Step 1 – Meet the Net Worth Requirements

Applicants for the Tennessee Money Transmitter License must have a company net worth (assets – liabilities) of at least $100,000 plus an additional $25,000 per office location or authorized agent to a maximum requirement of $500,000. Applicants must submit an audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Money transmitters must purchase and maintain a surety bond with a limit of $50,000 plus $10,000 per additional office location to a maximum of $800,000

Step 3 – Request a NMLS Account

The Tennessee 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 Tennessee 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
  • Names and locations of all company authorized agents
  • The following company contacts:
    • Primary
    • Primary consumer complaint
    • Licensing
    • Legal
    • Exams
  • Company’s FinCEN registration number and filing date
  • Disclosure questions
  • Company’s AML/BSA policy
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure
  • Certificate of Good Standing
  • Copy of the company’s independently reviewed AML/BSA policy
  • Flow of funds structure
  • Sample contract used with authorized agents (if applicable)
  • Sample form of payment instrument(s) used
  • Company staffing and internal policies
  • Company formation documents
  • Management chart detailing the company’s hierarchy
  • Organizational chart detailing the company’s ownership structure
  • List of previous money transmission services provided in Tennessee (if applicable)

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

• • $250 license fee
  • Additional $250 license fee for applicants with 5 or more agents
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)
  • Annual fee of $0.25 per authorized agent (the first 100 agents are exempt)

How Do Tennessee 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 Tennessee 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 Tennessee Money Transmitter License?

Tennessee 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 limit of $50,000 plus $10,000 per additional office location to a maximum of $800,000.

How Do Tennessee Money Transmitters File Their Bond?

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

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

To avoid claims on their bond, money transmitters in Tennessee 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
• Transmit all money owed to consumers

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

Tennessee 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 Tennessee Money Transmitter Customers?

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