Massachusetts Seller of Checks Bond: A Comprehensive Guide

May 24, 2021

This guide provides information for insurance agents to help their customers obtain Massachusetts Seller of Checks Bonds

At a Glance:

• Average Cost: Between $1,500 to $7,000 of the bond amount per year based on the applicant’s credit
• Bond Amount: $100,000
• Who Needs it: All check sellers operating in Massachusetts
• Purpose: To ensure the public will receive compensation for any damages should the check seller fail to comply with licensing law
• Who Regulates Check Sellers in Massachusetts: The Massachusetts Division of Banks

Background

Massachusetts general law 167F requires all check sellers operating in the state to obtain a license with the Division of Banks. The Massachusetts legislature enacted the licensing laws and regulations to ensure that check sellers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, check sellers must purchase and maintain a $100,000 surety bond to be eligible for licensure.

What is the Purpose of the Massachusetts Seller of Checks Bond?

Massachusetts requires 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 check seller fails to comply with the licensing regulations set forth in Massachusetts general law 167F. Specifically, the bond protects the public in the event the check seller engages in any acts of fraud or sells invalid checks or money orders. In short, the bond is a type of insurance that protects the public if the check seller breaks licensing laws.

How Can an Insurance Agent Obtain a Massachusetts Seller of Checks Surety Bond?

BondExchange makes obtaining a Massachusetts Seller of Checks Bond easy. Simply login to your account and use our keyword search to find the “checks” 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 Massachusetts Seller of Checks Bond?

Surety companies will run a credit check on the owner’s of the check selling company to determine eligibility and pricing for the Massachusetts Seller of Checks 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 Massachusetts Seller of Checks Bond Cost?

The Massachusetts Seller of Checks surety bond can cost anywhere between $1,500 to $7,000 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 $100,000 bond requirement.

$100,000 Seller of Checks 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 Massachusetts Define “Check Seller?”

The Massachusetts Division of Banks defines a check seller as any individual or business entity who is “engaged in the business of selling, issuing, or registering checks or money orders.”

Exemptions to this definition include:

• Banks
• National banking or savings loan associations authorized to do business in Massachusetts

How do Check Sellers Apply for a License in Massachusetts?

Check sellers in Massachusetts 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 Massachusetts Check Seller License expires annually and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirements

Applicants for the Massachusetts Check Seller License must have a positive company net worth (assets – liabilities). Applicants must submit an audited or reviewed financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Check sellers must purchase and maintain a $100,000 surety bond

Step 3 – Hire a Qualifying Individual

Applicants for the Massachusetts Check Seller License must employ a qualified individual who is capable of managing the day to day operations of the check selling business. Applicants must hire a qualified individual for each branch location where the company services Massachusetts consumers.

Step 4 – Request a NMLS Account

The Massachusetts Seller 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 5 – Complete the Application

All Massachusetts Seller of Checks License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Audited or reviewed company financial statements indicating a positive net worth
  • Names and locations of all authorized agents who conduct money services business on behalf of the applicant
  • Primary company and consumer complaint contact information
  • Company FinCen registration
  • Company’s independently reviewed AML policy
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure the applicant intends to employ
    • Written operating procedures regarding the selling, issuing and registering of checks or money orders
    • Maintenance of books and records
  • Certificate of Good Standing
  • Company formation documents
  • W-9 Form
  • List of all the company’s lines of credit
  • Management chart detailing the company’s hierarchy
  • Organizational chart detailing the company’s ownership structure
  • Financial statements for all company owners with an ownership stake of 10% or more (email to nmls@mass.gov)

Applicants for the Massachusetts Check Seller License must pay the following fees when submitting their license application:

• • $1,000 licensing fee
  • $300 application fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)
  • $0.25 annual fee, to a maximum of $25,000, for all company authorized agents (the first $100 agents are exempt from this fee)

How Do Massachusetts Check Sellers Renew Their License?

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 Massachusetts Check Seller License expires annually and must be renewed before the expiration date.

What Are the Insurance Requirements for the Massachusetts Check Seller License?

The State of Massachusetts does not require check sellers to obtain any form of liability insurance as a prerequisite to obtaining a business license. Check sellers must purchase and maintain a $100,000 surety bond.

How Do Massachusetts Check Sellers File Their Bond?

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 check selling company. The surety company should include the following information on the bond form:

• Legal name and NMLS number of entity/individual(s) buying the bond
• Surety company’s name and NAIC number
• Bond amount
• Date the bond is signed

What Can Massachusetts Check Sellers Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, check sellers in Massachusetts 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 sell any faulty checks or money orders

What Other Insurance Products Can Agents Offer Check Sellers in Massachusetts?

Massachusetts does not require 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 Massachusetts Check Seller Customers?

The NMLS conveniently provides a public database to search for active check sellers in Massachusetts. 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.