Vermont Money Transmitter Bond: A Comprehensive Guide

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

At a Glance:

• Lowest Cost: 1.5% of the bond amount per year based on the applicant’s credit
• Bond Amount: $100,000 plus an additional $10,000 per authorized delegate to a maximum of $500,000
• Who Needs it: All money transmitters operating in Vermont
• Purpose: To ensure the public will receive compensation for any damages should the money transmitter fail to comply with licensing law
• Who Regulates Money Transmitters In Vermont: The Vermont Department of Financial Regulation

Background

Vermont general law 8 V.S.A. § 2505 requires all money transmitters 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 money transmitters engage in ethical business practices. 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 Vermont Money Transmitter Bond?

Vermont 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 outlined in Vermont general law Title 8 Chapter 79. 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 Vermont Money Transmitter Surety Bond?

BondExchange makes obtaining a Vermont 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?

Vermont statute 2507 dictates that the limit on the money transmitter bond is $100,000 plus an additional $10,000 per authorized delegate to a maximum of $500,000. However, the Department of Financial Regulation may increase the bond amount, on a case by case basis, to a maximum of $2 million if they deem it necessary.

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

The Vermont Money Transmitter Surety Bond can cost anywhere between 1.5% to 7.5% 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 $100,000 bond requirement.

$100,000 Money Transmitter 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 Vermont Define “Money Transmitter”?

Vermont statute 2500 defines a money transmitter as any business entity who sells or issues payment instruments or who receives money for transmission.

What Activities are Authorized Under the Vermont Money Transmitter License?

The Vermont Money Transmitter License authorizes the following activities as defined by the NMLS’s business activities definitions chart:

• Electronic money transmitting
• Issuing traveler’s checks
• Selling traveler’s checks
• Issuing money orders
• Selling money orders
• Bill paying
• Issuing and/or selling drafts o Issuing prepaid access (including virtual currency)
• Selling prepaid access (including virtual currency)
• Check cashing
• Foreign currency dealing or exchanging

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 Vermont?

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

Step 1 – Purchase a Surety Bond

Money Transmitters must purchase and maintain a surety bond with a limit of $100,000 plus an additional $10,000 per authorized delegate to a maximum of $500,000

Step 2 – Meet the Net Worth Requirements

Applicants for the Vermont Money Transmitter License must maintain a company net worth (assets – liabilities) of at least $100,000. Money transmitters must submit a company financial statement verifying their net worth when submitting their license application.

Step 3 – Hire a Qualifying Individual

Applicants for the Vermont Money Transmitter License must employ a qualified individual who is capable of managing the day-to-day operations of the business. The qualifying individual must be employed in a management position.

Step 4 – Request an NMLS Account

The Vermont 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 5 – Complete the Application

All Vermont Money Transmitter License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Company financial statements indicating a net worth of at least $100,000
  • Locations of all company authorized delegates
  • The following company contacts:
    • Primary
    • Primary consumer complaint
    • Exam delivery
    • Pre-exam contact
  • Company’s FinCEN confirmation number and filing date
  • Disclosure questions
  • Company’s independently reviewed AML/BSA policy
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • List of all destination countries
    • Operating structure
  • Certificate of Good Standing
  • Company’s financial privacy policy
  • The following document samples:
    • Gramm-Leach-Bliley privacy notice
    • Sample form of payment instrument(s) used
    • Specimen form of all receipts used
    • Sample contract used with authorized delegates
  • Company formation documents
  • Management and organizational charts
  • Trust account authorization

The following items must emailed to [email protected]

• • Financial statements for all company owners with an ownership stake of 10% or more
  • Individual criminal background check requirements
  • Home state licensure
  • Monthly sales projections for the next two years

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

• • $1,000 license fee
  • $1,000 application fee
  • $36.25 background check fee (per person)
  • $25 fee per authorized delegate
  • $15 credit report fee (per person)
  • $0.25 annual fee per authorized delegate to a maximum of $25,000 (the first 100 delegates are exempt)

How Do Vermont Money Transmitters Renew Their License?

Money transmitters can renew their licenses online through the NMLS. License holders need to simply login to their account to access their renewal application. The Vermont 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 Vermont Transmitter License?

Vermont does not require money transmitters to obtain 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 $100,000 plus an additional $10,000 per authorized delegate to a maximum of $500,000.

How Do Vermont Money Transmitters File Their Bond?

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:

• 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

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

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

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

Vermont 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 Vermont Money Transmitter Customers?

The NMLS conveniently provides a public database to search for active money transmitters 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.