Illinois Debt Management Service Provider Bond: A Comprehensive Guide

This guide provides information for insurance agents to help debt managers obtain Illinois Debt Management Service Provider 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 services providers seeking to obtain a license in Illinois
• Purpose: To ensure the public will receive compensation for any damages should the debt manager fail to comply with licensing law
• Who Regulates Debt Managers in Illinois: The Illinois Department of Financial and Professional Regulation

Background

The Illinois Debt Management Service Act requires all debt management services providers operating in the state to obtain a license with the Department of Financial and Professional Regulation. The Illinois legislature enacted the licensing laws and regulations to ensure that debt managers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, debt managers must purchase and maintain a $25,000 surety bond to be eligible for licensure.

What is the Purpose of the Illinois Debt Management Service Provider Bond?

Illinois requires debt management services 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 licensing regulations. In short, the bond is a type of insurance that protects the public if the debt manager breaks licensing laws.

How Can an Insurance Agent Obtain an Illinois Debt Management Service Provider Surety Bond?

BondExchange makes obtaining an Illinois Debt Management Service Provider 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.

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 Illinois Debt Management Service Provider Bond?

Surety companies will run a credit check on the owners of the debt management company to determine eligibility and pricing for the Illinois Debt Management Service Provider bond. Owner’s 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 Illinois Debt Management Service Provider Bond Cost?

The Illinois Debt Management Service Provider surety bond can cost anywhere between $375 to $1,250 per year or $38 to $125 per month. 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 the $25,000 bond requirement.

$25,000 Debt Management Bond Cost

*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 Illinois Define “Debt Management Service Provider?”

To paraphrase the Illinois Debt Management Service Act, a debt management service provider (debt manager) is any business entity who manages the financial affairs of a debtor and receives money from the debtor to pay to a creditor.

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 Services Providers Apply for a License in Illinois?

Debt management services providers in Illinois 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 Illinois Debt Management License expires on January 1 of each year and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirements

Applicants for the Illinois Debt Management License must have a company net worth (assets – liabilities) of at least $1,000 at all times. Applicants must submit an unaudited financial statement verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Debt managers must purchase and maintain a $25,000 surety bond

Step 3 – Request NMLS Account

The Illinois Debt Management 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 Illinois Debt Management License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Unaudited financial statements indicating a company net worth of at least $1,000
  • Primary company and consumer complaint contact information
  • A separate bank account used for the purpose of depositing customer funds and making disbursements to creditors or transferring fees to the general account
  • Business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure the applicant intends to employ
  • Certificate of Good Standing obtained from the Illinois Secretary of State
  • Sample contract used between debt managers and consumers
  • Company formation documents
  • Organizational chart detailing the company’s ownership structure
  • Credit report explanation for all derogatory accounts
  • Resume detailing the applicant’s job experience

Debt managers must pay the following fees when submitting their application:

• • $130 license fee
  • $15 credit report fee (per person)

How Do Illinois Debt Managers Renew Their License?

Debt managers can renew their licenses online through the NMLS. License holders need to simply login to their account to access their renewal application. The Illinois Debt Management License expires on January 1 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Illinois Debt Management License?

The State of Illinois does not require debt managers 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 Illinois Debt Managers File Their Bond?

Debt managers 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 debt management services provider. The surety company should include the following information on the bond form:

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

What Can Illinois Debt Management Services Providers Do to Avoid Claims Against Their Bond?

In order to avoid claims made against their bond, debt management services providers in Illinois must follow all license regulations in the state. Including some of the most important issues below that tend to cause claims:

• Pay all required taxes and fees
• Do not engage in any acts of fraud
• Properly account for all funds received from consumers

What Other Insurance Products Can Agents Offer Debt Managers in Illinois?

Illinois does not require debt managers to purchase any form of liability insurance as a prerequisite to obtaining a license. However, most reputable agencies 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 Illinois Debt Management Services Provider Customers?

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