Vermont Licensed Lender Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain Vermont Licensed Lender Bonds
At a Glance:
- Lowest Cost: 0.75% of the bond amount per year based on the applicant’s credit
- Bond Amount: Based on the annual volume of loans issued
Table 1.1
| Loans Issued | Bond Amount |
|---|---|
| $0 to $1 million | $50,000 |
| Over $1 million to $15 million | $100,000 |
| More than $50 million | $150,000 |
- Who Needs it: All licensed lenders operating in Vermont
- Purpose: To ensure the public will receive compensation for any damages should the lender fail to comply with licensing law
- Who Regulates Licensed Lenders In Vermont: The Vermont Department of Financial Regulation
Background
Vermont general law 8 V.S.A. § 2201 requires all lenders operating in the state to obtain a license with the Department of Financial Regulation. The Vermont legislature enacted the licensing laws and regulations to ensure that lenders engage in ethical business practices. To provide financial security for the enforcement of the licensing law, lenders must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Vermont Licensed Lender Bond?
Vermont requires lenders 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 lender fails to comply with the regulations outlined in Vermont general law Title 8 Chapter 73. Specifically, the bond protects the public in the event the lender engages in any acts of fraud or breaches any contracts made with consumers. In short, the bond is a type of insurance that protects the public if the lender breaks licensing laws.
How Can an Insurance Agent Obtain a Vermont Licensed Lender Surety Bond?
BondExchange makes obtaining a Vermont Licensed Lender Bond easy. Simply login to your account and use our keyword search to find the “lender” 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 Vermont Licensed Lender Bond?
Surety companies will run a credit check on the owners of the lending company to determine eligibility and pricing for the Vermont Licensed Lender 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 Vermont Licensed Lender Bond Cost?
The Vermont Licensed Lender 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 a $50,000 bond requirement.
$50,000 Licensed Lender Bond Cost
Table 1.2
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 700+ | $375 | $38 |
| 650 – 699 | $500 | $50 |
| 625 – 649 | $625 | $63 |
| 600 – 624 | $750 | $75 |
| 550 – 599 | $2,000 | $200 |
| 500 – 549 | $2,500 | $250 |
*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 Vermont Define “Lender?”
To paraphrase Vermont statute 2200, a lender is any business entity who makes or issues loans to Vermont consumers.
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 Lenders Apply for a License in Vermont?
Lenders in Vermont 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 Vermont Lender License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Lenders must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 2 – Meet the Liquid Assets Requirements
Lenders in Vermont must maintain at least $25,000 ($50,000 commercial lending) in available liquid assets per office location. Applicants must submit audited financial statements, verifying they meet this requirement, when submitting their license application.
Step 3 – Hire a Qualifying Individual
Applicants for the Vermont Lender License must employ a qualified individual who is capable of managing the day-to-day operations of the lending business. The qualifying individual must be employed in a management position at the company’s main corporate office.
Step 4 – Request an NMLS Account
The Vermont Lender 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 5 – Complete the Application
All Vermont Lender License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Audited company financial statements
- The following company contacts:
- Primary
- Primary consumer complaint
- Exam delivery
- Pre-exam
- Account information for the company’s letter of credit, operating, and/or trust primary bank account(s)
- Disclosure questions
- Company business plan containing the following information:
- Marketing strategies
- Products & services
- Target markets
- Fee schedule
- Operating structure
- Certificate of good standing
- Company’s financial privacy policy
- The following document samples:
- Gramm-Leach-Bliley privacy notice
- Vermont commitment letter (if engaged in residential mortgage lending)
- Vermont high rate and high point notices (if applicable)
- Company formation documents
- Company management and organizational charts
- Trust account authorization
- List of all warehouse agreements and all other loan funding sources
The following items must be emailed to [email protected]
-
- Financial statements for all company owners with an ownership stake of 10% or more
- Home state licensure
Lenders must pay the following fees when submitting their license application:
-
- $1,000 license fee
- $1,000 application fee
- $100 NMLS processing fee
- $36.25 background check fee (per person)
- $15 credit report fee (per person)
How Do Vermont Licensed Lenders Renew Their License?
Licensed lenders can renew their licenses online through the NMLS. License holders need to simply login to their account to access their renewal application. The Vermont Lender License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Vermont Lender License?
The State of Vermont does not require lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Lenders must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do Vermont Lenders File Their Bond?
Lenders 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 lending company. The surety company should include the following information on the bond form:
- Legal name and address of entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Bond amount
- Date the bond is signed
- Date the bond goes into effect
What Can Vermont Lenders Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, lenders in Vermont 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
- Do not breach any contracts made with consumers
What Other Insurance Products Can Agents Offer Lenders in Vermont?
Vermont does not require lenders 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 Vermont Lender Customers?
The NMLS conveniently provides a public database to search for active lenders in Vermont. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
