Wisconsin Loan Company Bond: A Comprehensive Guide

September 9, 2021

This guide provides information for insurance agents to help loan companies obtain Wisconsin Loan Company Bonds

At a Glance:

• Average Cost: Between 1.5% to 7.5% of the bond amount per year based on the applicant’s credit
• Bond Amount: $5,000 per office location to a maximum of $50,000
• Who Needs it: All loan companies operating in Wisconsin
• Purpose: To ensure the public will receive compensation for any damages should the loan company fail to comply with licensing law
• Who Regulates Loan Companies In Wisconsin: The Wisconsin Department of Financial Institutions

Background

Wisconsin statute 138.09 requires all loan companies operating in the state to obtain a license with the Department of Financial Institutions. The Wisconsin legislature enacted the licensing laws and regulations to ensure that loan companies engage in ethical business practices. To provide financial security for the enforcement of the licensing law, loan companies must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Wisconsin Loan Company Bond?

Wisconsin requires loan companies 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 loan company fails to comply with the licensing regulations set forth in Wisconsin statute 138.09. Specifically, the bond protects the public in the event the loan company 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 loan company breaks licensing laws.

How Can an Insurance Agent Obtain a Wisconsin Loan Company Bond?

BondExchange makes obtaining a Wisconsin Loan Company Bond easy. Simply login to your account and use our keyword search to find the “loan” bond in our database. Don’t have a login? Enroll 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.

Is a Credit Check Required for the Wisconsin Loan Company Bond?

Surety companies will run a credit check on the owners of the loan company to determine eligibility and pricing for the Wisconsin Loan Company 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 Wisconsin Loan Company Bond Cost?

The Wisconsin Loan Company 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 $10,000 bond requirement.

$10,000 Loan Company Bond Cost

How Does Wisconsin Define “Loan Company?”

To paraphrase Wisconsin Statute 138.09, a loan company is any business entity that provides a borrower with money that must be repaid over a specified period at an interest rate of at least 18% per year.

How do Loan Companies Apply for a License in Wisconsin?

Loan companies in Wisconsin 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 Wisconsin Loan Company 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 Wisconsin Loan Company License must amass a company net worth (assets – liabilities) of at least $50,000 and at all times maintain a positive working capital (assets – liabilities). Applicants must submit financial statements verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Loan companies must purchase and maintain a surety bond with a limit of $5,000 per office location to a maximum of $50,000

Step 3 – Request an NMLS Account

The Wisconsin Loan Company 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 Wisconsin Loan Company License applications can be completed online through the NMLS. Completed applications will include the following items:

• • Company financial statements
  • The following company contacts:
    • Primary
    • Primary consumer complaint
    • Licensing
    • Consumer complaint (public)
    • Exam delivery
    • Pre-exam
  • Disclosure questions
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure
    • Management Team
  • Certificate of Good Standing
  • The following document samples
    • Loan agreements used with consumers
    • Consumer consent statement
  • Company management and organizational charts
  • Criminal history report
  • List of other types of business that will be conducted at the applicant’s main office
  • Supplemental questions form 

Loan companies must pay the following fees when submitting their application:

• • $500 license fee
  • $300 application fee

How Do Wisconsin Loan Companies Renew Their License?

Loan companies can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Wisconsin Loan Company License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Wisconsin Loan Company License?

Wisconsin does not require loan companies to obtain any form of liability insurance as a prerequisite to obtaining a business license. Loan companies must purchase and maintain a surety bond with a limit of $5,000 per office location to a maximum of $50,000

How Do Wisconsin Loan Companies File Their Bond?

Loan companies 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 loan company. The surety company should include the following information on the bond form:

• Legal name 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 Wisconsin Loan Companies Do to Avoid Claims Against Their Bond?

To avoid claims made against their bond, loan companies in Wisconsin 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 Loan Companies in Wisconsin?

Wisconsin does not require loan companies 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 Wisconsin Loan Company Customers?

Wisconsin conveniently provides a public database to search for active loan companies in the state. The database can be accessed here. Contact BondExchange for help developing a marketing piece. Agents can also leverage our print-mail relationships for discounted mailing services.