Indiana Small Loan Lender Bond: A Comprehensive Guide
May 12, 2021
This guide provides information for insurance agents to help small loan lenders obtain Indiana Small Loan Lender Bonds
At a Glance:
- Average Cost: Between 1% to 12.5% of the bond amount per year based on the applicant’s credit
- Bond Amount: $50,000 per location where small loans are made up to a maximum limit of $200,000
- Who Needs it: All small loan lenders seeking to obtain a license in Indiana
- Purpose: To ensure the public will receive compensation for any damages should the small loan lender fail to comply with licensing law
- Who Regulates Small Loan Lenders in Indiana: The Indiana Department of Financial Institutions
Background
Indiana code 24-4.5-7-102 requires all small loan lenders operating in the state to obtain a license with the Department of Financial Institutions. The Indiana legislature enacted the licensing laws and regulations to ensure that small loan lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, small loan lenders must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Indiana Small Loan Lender Bond?
Indiana requires small loan 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 small loan lender fails to comply with the licensing regulations set forth in the Indiana Consumer Credit Code. Specifically, the bond protects consumers in the event the small loan lender engages in any acts of fraud or employs unethical collection tactics. In short, the bond is a type of insurance that protects the public if the small loan lender breaks licensing laws.
How Can an Insurance Agent Obtain an Indiana Small Loan Lender Surety Bond?
BondExchange makes obtaining an Indiana Small Loan Lender 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 Indiana Small Loan Lender Bond?
Surety companies will run a credit check on the owners of the small loan lending company to determine eligibility and pricing for the Indiana small loan lender bond. Owner’s 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 Indiana Small Loan Lender Bond Cost?
The Indiana Small Loan Lender surety bond can cost anywhere between 1% to 12.5% 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 the $50,000 bond requirement.
$50,000 Small Loan Lender Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 720+ | $500 |
| 680 – 719 | $750 |
| 650 – 679 | $1,000 |
| 600 – 649 | $2,000 |
| 550 – 599 | $3,750 |
| 500 – 549 | $6,250 |
*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 Indiana Define “Small Loan Lender?”
Indiana code 24-4.5-7-104 defines a small loan lender as any business entity that issues principal loans that are greater than $50 and do not exceed $550. Small loan lenders also hold the borrower’s check for a specific period before either offering the check for deposit or exercising the authorization to debit the borrower’s account.
How do Small Loan Lenders Apply for a License in Indiana?
Small loan lenders in Indiana must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the application form for details on the process.
License Period – The Indiana Small Loan Lender License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Meet the Experience Requirements
Applicants for the small loan lender license must show a minimum of two years of finance related experience for each individual who will manage an Indiana branch location
Step 2 – Meet the Net Worth Requirements
Applicants for the Indiana Small Loan Lender License must have a company net worth (assets – liabilities) of at least $100,000, with a minimum of $50,000 in liquid assets. Applicants must submit either a reviewed or audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.
Step 3 – Purchase a Surety Bond
Small loan lenders must purchase and maintain a $50,000 surety bond per branch location up to a maximum limit of $200,000
Step 4 – Complete the Application
All regulatory Indiana Small Loan Lender License applications should be mailed to the following address:
Department of Financial Institutions
30 South Meridian Street, Suite 300
Indianapolis, Indiana 46204-2759
Small loan lenders should complete the application in its entirety, and submit the following items:
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- Three references including one reference who is a representative of a financial institution
- Sample loan application
- Completed initial small loan agreement and consecutive small loan
- Borrower’s rights and responsibilities pamphlet
- Extended payment plan disclosure
- Sample extended payment plan agreement
- Military covered borrower form
Small loan lenders must pay a $2,000 license fee, plus an additional $750 per branch location, when submitting their license application.
How do Indiana Small Loan Lenders Renew Their License?
Small loan lenders should mail their completed renewal application to the following address:
Department of Financial Institutions
30 South Meridian Street, Suite 300
Indianapolis, Indiana 46204-2759
The DFI will mail license holders their renewal forms prior to the license expiration date. The Indiana Small Loan Lender License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Indiana Small Loan Lender License?
The State of Indiana does not require small loan lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Small loan lenders must purchase and maintain a $50,000 surety bond per branch location up to a maximum limit of $200,000.
How Do Indiana Small Loan Lenders File Their Bond ?
Small loan lenders should mail the completed bond form, including the power of attorney, to the following address:
Department of Financial Institutions
30 South Meridian Street, Suite 300
Indianapolis, Indiana 46204-2759
The small loan lender surety bond requires signatures from both the surety company that issues the bond and a representative from the small loan lending company. The surety company should include the following information on the bond form:
- Legal name, city, and county 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 Indiana Small Loan Lenders Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, small loan lenders in Indiana must follow all license regulations in the state. Including some of the most important issues below that tend to cause claims:
- Do not threaten to use the criminal process to collect a loan
- Do not make deceptive or misleading statements regarding a small loan or consequences of taking a small loan
- Do not collect attorney’s fees on small loans
- Do not alter any information on a check
- Do not engage in any acts of fraud
What Other Insurance Products Can Agents Offer Small Loan Lenders in Indiana?
Indiana does not require small loan lenders 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 Indiana Small Loan Lender Customers?
Indiana conveniently provides a public database to search for active small loan 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 services.
