Louisiana Money Transmitter and Sale of Checks Bond: A Comprehensive Guide

May 21, 2021

This guide provides information for insurance agents to help businesses obtain Louisiana Money Transmitter and Sale of Checks 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: Between $25,000 to $500,000 (more on this later)
• Who Needs it: All money transmitters and check sellers operating in Louisiana
• Purpose: To ensure the public will receive compensation for any damages should the money transmitter or check seller fail to comply with licensing law
• Who Regulates Money Transmitters and Check Sellers in Louisiana: The Louisiana Office of Financial Institutions

Background

Louisiana statute 1033 requires all money transmitters and check sellers operating in the state to obtain a license with the Office of Financial Institutions. The Louisiana legislature enacted the licensing laws and regulations to ensure that money transmitters and check sellers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, money transmitters and check sellers must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Louisiana Money Transmitter and Seller of Checks Bond?

Louisiana requires money transmitters and check sellers 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 or check seller fails to comply with the licensing regulations set forth in the Louisiana Sale of Checks and Money Transmission Act. Specifically, the bond protects the public in the event the money transmitter or check seller engages in any acts of fraud or causes the consumer to suffer a financial loss. In short, the bond is a type of insurance that protects the public if the money transmitter or check seller breaks licensing laws.

How Can an Insurance Agent Obtain a Louisiana Money Transmitter and Seller of Checks Surety Bond?

BondExchange makes obtaining a Louisiana Money Transmitter and Seller of Checks 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? 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.

How is the Bond Amount Determined?

Louisiana statute 1037 grants the Office of Financial Institutions the authority to determine the limit on the Money Transmitter and Sale of Checks Bond on a case by case basis. First time license applicants will be required to purchase a $25,000 surety bond, unless determined otherwise based on their proposed business plan for their first year in business. When it comes time to renew their license, money transmitters and check sellers must purchase a new bond that reflects one-half of the checks outstanding, or one percent of annual volume of money transmitted rounded to the nearest thousand. The bond limit must be at least $25,000 and may not exceed $500,000

Is a Credit Check Required for the Louisiana Money Transmitter and Sale of Checks Bond?

Surety companies will run a credit check on the owners of the money transmission or check selling to determine eligibility and pricing for the Louisiana Money Transmitter and Sale of Checks 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 Louisiana Money Transmitter and Sale of Checks Bond Cost?

The Louisiana Check Seller and Money Transmitter 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 a $25,000 bond requirement.

$25,000 Money Transmitter and Check Seller 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 Louisiana Define “Money Transmitter?”

Louisiana statute 1032 defines a money transmitter as any business entity who performs one or both of the following services:

• Sells or issues stored value or payment instruments including checks, money orders, and traveler’s checks
• Receives money or monetary value for transmission including by payment instrument, wire, facsimile, electronic transfer, or Automated Clearing House (ACH) debit

How Does Louisiana Define “Check Seller?”

Louisiana statute 1032 defines a check seller as any business entity who sells, issues, or delivers checks to the general public.

How do Money Transmitters and Check Sellers Apply for a License in Louisiana?

Money transmitters and check sellers in Louisiana 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 Louisiana Money Transmitter and Sale of Checks 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 Louisiana Money Transmitter and Check Seller License must have a company net worth (assets – liabilities) of at least $100,000. Applicants must submit a company financial statement verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Money transmitters and check sellers must purchase and maintain a surety bond with a minimum limit of $25,000 (see the above section for help determining the required bond limit)

Step 3 – Request a NMLS Account

The Louisiana Money Transmitter and Sale of Checks 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 Louisiana Money Transmitter and Check Seller 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
  • Information for the company’s letter of credit, operating, and/or trust primary accounts
  • Certificate of Good Standing obtained from the Louisiana Secretary of State
  • Organizational chart showing the company’s ownership structure
  • List the states the company is currently licensed in
  • Company business plan containing the following information:
    • 3 year financial pro forma
    • Anticipated volume of checks to be sold and/or money to be transmitted for the calendar year
    • Flow of funds chart and the anticipated number of selling or transmitting locations
  • List of all the company’s authorized agents and their locations
  • Sample of all documents and payment instruments used throughout the course of business
  • Application Affidavit
  • Certificate of Resolution
  • Agent for Service of Process Acknowledgement

Money transmitters and Check Sellers must pay the following fees when submitting their license application:

• • $800 application fee
  • $36.25 background check fee (per person)
  • $25 fee for each branch location up to a maximum of $5,200
  • $15 credit report fee (per person)

How Do Louisiana Money Transmitters and Check Sellers Renew Their License?

Money transmitters and check sellers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Louisiana Money Transmitter and Sale of Checks License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Louisiana Money Transmitter and Check Seller License?

The State of Louisiana does not require money transmitters and check sellers to obtain any form of liability insurance as a prerequisite to obtaining a business license. Money transmitters and check sellers must purchase and maintain a surety bond with a minimum limit of $25,000 (see the above section for help determining the required bond limit).

How Do Louisiana Money Transmitters and Check Sellers File Their Bond?

Money transmitters and check sellers 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 or check selling 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, address, and phone number
• Bond amount
• Date the bond is signed

What Can Louisiana Money Transmitters and Check Sellers Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, money transmitters and check sellers in Louisiana 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 debts owed to creditors
• Ensure full payment of all money owed to consumers

What Other Insurance Products Can Agents Offer Money Transmitters and Check Sellers in Louisiana?

Louisiana does not require money transmitters and check sellers 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 Louisiana Money Transmitter and Check Seller Customers?

The NMLS conveniently provides a public database to search for active money transmitters and check sellers in Louisiana. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.