Minnesota Credit Services Organization Bond: A Comprehensive Guide

This guide provides information for insurance agents to help their customers obtain Minnesota Credit Services Organization Bonds

At a Glance:

• Lowest Cost: $100 per year or $10 per month
• Bond Amount: $10,000
• Who Needs it: All credit services organizations operating in Minnesota
• Purpose: To ensure the public will receive compensation for any damages should the credit services organization fail to comply with licensing law
• Who Regulates Credit Services Organizations in Minnesota: The Minnesota Department of Commerce

Background

Minnesota statute 332.54 requires all credit services organizations operating in the state to obtain a license with the Department of Commerce. The Minnesota legislature enacted the licensing laws and regulations to ensure that credit services organizations engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, credit services organizations must purchase and maintain a $10,000 surety bond to be eligible for licensure.

What is the Purpose of the Minnesota Credit Services Organization Bond?

Minnesota requires credit services organizations 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 credit service organization fails to comply with the regulations set forth in Minnesota statutes 332.52-60. Specifically, the bond protects the public in the event the credit services organization engages in any acts of fraud or fails to honor contractual obligations made with consumers. In short, the bond is a type of insurance that protects the public if the credit services organization breaks licensing laws.

How Can an Insurance Agent Obtain a Minnesota Credit Services Organization Surety Bond?

BondExchange makes obtaining a Minnesota Credit Services Organization Bond easy. Simply login to your account and use our keyword search to find the “credit” 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 Minnesota Credit Services Organization Bond?

No, a credit check is not required for the Minnesota Credit Services Organization bond. Because the bond is considered relatively low risk, the same rate is offered to all credit services organizations in Minnesota.

How Much Does the Minnesota Credit Services Organization Bond Cost?

The Minnesota Credit Services Organization bond costs just $100 per year or $10 per month.

How Does Minnesota Define “Credit Services Organization?”

Minnesota statute 332.52 defines a credit services organization as any business entity that performs one or more of the following services:

• Improves a buyer’s credit record, history, or rating
• Obtains an extension of credit for a buyer
• Provide advice or assistance to a buyer with regard to either of the above points

Exemptions to the definition include:

• Individuals/businesses authorized to make loans or issue extensions of credit
• Credit unions
• Non-profit organizations
• Prorating agencies
• Real estate brokers
• Collection agencies
• Licensed attorneys
• Broker/dealers registered with the Securities Exchange Commission or the Commodity Futures Trading Commission
• Consumer reporting agencies

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 Credit Services Organizations Apply for a License in Minnesota?

Credit services organizations in Minnesota 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 Minnesota Credit Services Organization License expires on June 30 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Credit services organizations must purchase and maintain a $10,000 surety bond

Step 2 – Request a NMLS Account

The Minnesota Credit Services Organization 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 3 – Complete the Application

All Minnesota Credit Services Organization License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Primary company and consumer complaint contact information
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure the applicant intends to employ
  • Certificate of Good Standing
  • The following document samples:
    • Disclosure statement
    • Contract with consumer
    • Notice of cancellation
  • Company formation documents
  • Management chart showing the company’s hierarchy
  • Organizational chart showing the company’s ownership structure
  • Disclose all state or federal litigation or unresolved complaints
  • BCA Form

Credit services organizations must pay a $1,000 license fee when submitting their application.

How Do Minnesota Credit Services Organizations Renew Their License?

Credit services organizations can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Minnesota Credit Services Organization License expires on June 30 of each year and must be renewed before the expiration date.

What are the Insurance Requirements for the Minnesota Credit Services Organization Bond?

Minnesota does not require credit services organizations to obtain any form of liability insurance as a prerequisite to obtaining a business license. Credit services organizations must purchase and maintain a $10,000 surety bond.

How Do Minnesota Credit Services Organizations File Their Bond?

Credit services organizations 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 credit services organization. The surety company should include the following information on the bond form:

• Legal name and NMLS number of entity/individual(s) buying the bond
• Surety company’s name
• Bond amount
• Date the bond goes into effect
• Date the bond is signed

What Can Minnesota Credit Services Organizations Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, credit services organizations in Minnesota must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:

• Do not engage in any acts of fraud
• Honor all contractual obligations with consumers

What Other Insurance Products Can Agents Offer Credit Services Organizations in Minnesota?

Minnesota does not require credit services organizations 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 Minnesota Credit Services Organization Customers?

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