Colorado Supervised Lender Bond: A Comprehensive Guide
March 25, 2021
This guide provides information for insurance agents to help supervised lenders obtain Colorado Supervised Lender Bonds
At a Glance:
- Average Cost: Between 1.5% to 5% of the bond amount per year based on the supervised lender’s credit
- Bond Amount: Based on the lender’s total loan volume for the prior calendar year
Table 1.1
| Annual Colorado Loan Volume | Bond Amount |
|---|---|
| $0 to $500,000 | $15,000 |
| Over $500,000 to $1 million | $20,000 |
| Over $1 million | $25,000 |
- Who Needs It: All individuals and business entities seeking to obtain a supervised lender license in the State of Colorado
- Purpose: To ensure the public will receive compensation for any damages should the supervised lender fail to comply with registration law
- Who Regulates Supervised Lenders in Colorado: The Colorado Department of Law
Background
Colorado Statute 5-2-302 requires all supervised lenders operating in the state to obtain a license with the Colorado Department of Law. The Colorado legislature enacted the licensing laws and regulations to ensure that supervised lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, supervised lenders must purchase and maintain a surety bond (limits outlined in Table 1.1) to be eligible for licensure.
What is the Purpose of the Colorado Supervised Lender Bond?
Colorado requires supervised 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 licensing regulations. 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 Colorado Supervised Lender Surety Bond?
BondExchange makes obtaining a Colorado Supervised 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? 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 Colorado Supervised Lender Bond?
Surety companies will run a credit check on the owners of the lending company to determine eligibility and pricing for the Colorado Supervised 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 Colorado Supervised Lender Bond Cost?
The Colorado Supervised Lender surety bond can cost anywhere between 1.5% to 5% of the bond amount per year. 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 a $20,000 bond requirement.
$20,000 Supervised Lender Bond Cost
Table 1.2
| Credit Score | Bond Cost (1 year) |
|---|---|
| 800+ | $300 |
| 650 – 799 | $400 |
| 600 – 649 | $800 |
| 450 – 599 | $1,000 |
*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 Colorado Define “Supervised Lender?”
The Colorado Department of Law defines a supervised lender as any business entity who issues consumer loans with an annual percentage rate greater than 12% a year.
How do Supervised Lenders Apply for a License in Colorado?
Supervised lenders in Colorado must navigate several steps to secure their business license. Below are the general guidelines, but license applicants should refer to the application form for details on the process.
License Period – The Colorado Supervised Lender License expires on March 1 of each year and must be renewed before the expiration date
Step 1 – Form a Business
All supervised lenders must register their business entity with the Colorado Secretary of State and submit their company formation documents with their license application
Step 2 – Purchase a Surety Bond
Supervised lenders must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 3 – Complete the Application
All Colorado Supervised Lender License applications should be mailed to the following address:
Colorado Judicial Center
1300 Broadway, 6th Floor
Denver, Colorado 80203
Supervised lenders must complete the application in its entirety, and pay a $1,900 application fee. Lender’s must submit a separate application for each branch location.
How Do Colorado Supervised Lenders Renew Their License?
Supervised lenders can renew their license online through the Department of Law’s renewal portal. The Colorado Supervised Lender License expires on March 1 of each year and must be renewed before the expiration date
What Are the Insurance Requirements for the Colorado Supervised Lender License?
The State of Colorado does not require supervised lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Supervised lenders must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do Colorado Supervised Lenders File Their Bond?
Supervised lenders should mail the completed bond form, including the power of attorney, to the following address:
Colorado Judicial Center
1300 Broadway, 6th Floor
Denver, Colorado 80203
The supervised lender 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 address
- Bond amount
- Date the Bond goes into effect
What Can Supervised Lenders Do to Avoid Claims Against the Colorado Supervised Lender Bond?
To avoid claims on the Supervised Lender Bond, lenders 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
- Pay all required taxes and fees
What Other Insurance Products Can Agents Offer Supervised Lenders in Colorado?
Colorado does not require supervised lenders to obtain any form of liability insurance. 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 Colorado Supervised Lender Customers?
Colorado conveniently provides a public database to search for active supervised lenders in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing service
