Ohio Credit Service Organization Bond: A Comprehensive Guide

August 5, 2021

This guide provides information for insurance agents to help their customers obtain Ohio Credit Service Organization Bonds

At a Glance:

• Average Cost: Between $500 to $2,500 per year based on the applicant’s credit
• Bond Amount: $50,000
• Who Needs it: All credit service organizations operating in Ohio
• Purpose: To ensure the public will receive compensation for any damages should the credit service organization violate registration law
• Who Regulates Credit Service Organizations In Ohio: The Ohio Division of Financial Institutions

Background

Ohio statute 4712.02 requires all credit service organizations operating in the state to register with the Division of Financial Institutions. The Ohio legislature enacted the registration laws and regulations to ensure that credit service organizations engage in ethical business practices. In order to provide financial security for the enforcement of the registration law, credit service organizations must purchase and maintain a $50,000 surety bond to be eligible for registration.

https://www.youtube.com/watch?v=Qg7odS-JXak

What is the Purpose of the Ohio Credit Service Organization Bond?

Ohio requires credit service organizations to purchase a surety bond as part of the application process to obtain a business registration. The bond ensures that the public will receive compensation for financial harm if the credit service organization fails to comply with the regulations set forth in the Ohio Credit Services Organization Act. Specifically, the bond protects the public in the event the credit service organization 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 credit service organization breaks registration laws.

How Can an Insurance Agent Obtain an Ohio Credit Service Organization Surety Bond?

BondExchange makes obtaining an Ohio Credit Service Organization Bond easy. Simply login to your account and use our keyword search to find the “credit” 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 Ohio Credit Service Organization Bond?

Surety companies will run a credit check on the owners of the credit service organization to determine eligibility and pricing for the Ohio Credit Service Organization 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 Ohio Credit Service Organization Bond Cost?

The Ohio Credit Service Organization Bond can cost anywhere between $500 to $2,500 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 Credit Service Organization Bond Cost

How Does Ohio Define “Credit Service Organization?”

Ohio statute 4712.01 defines a credit service organization as any business entity who provides one or more of the following services:

• Improves a consumer’s credit record, history, or rating
• Obtains an extension of credit for a consumer
• Removes adverse information from a consumer’s credit record
• Alter’s a consumer’s identity to prevent the display of the consumer’s credit information

How do Credit Service Organizations Apply For a Registration in Ohio?

Credit service organizations in Ohio must navigate several steps to secure their registration. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.

License Period – The Ohio Credit service Organization Registration expires on April 13 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Credit service organizations must purchase and maintain a $50,000 surety bond

Step 2 – Hire a Qualifying Individual

Ohio requires credit service organizations to hire a qualifying individual capable of handling the day to day operations of the credit services business. The qualifying individual must be hired as an office manager.

Step 3 – Request a NMLS Account

The Ohio Credit Service Organization Registration application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a registration application, applicants must first request to obtain an NMLS account.

Step 4 – Complete the Application

All Ohio Credit Service Organization registration applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • The following company contacts:
    • Primary
    • Primary consumer complaint
    • Exam Billing
    • Exam Delivery
    • Pre-Exam Contact
  • Disclosure questions
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure
  • Company’s business continuity plan
  • Certificate of Good Standing
  • Company staffing and internal policies
  • The following document samples:
    • All contracts used with consumers
    • Disclosure of litigation 
    • Sample of company’s anti-virus software
  • Company formation documents
  • Organizational chart detailing the company’s ownership structure
  • Documents verifying the qualifying individual’s experience

Credit service organizations must pay the following fees when submitting their license application:

• • $100 registration fee
  • $36.25 background check fee (per person)

How Do Ohio Credit Service Organizations Renew Their Registration?

Credit service organizations can renew their registration online through the NMLS. Registration holders need to simply login to their account to access their renewal application. The Ohio Credit service Organization Registration expires on April 13 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Ohio Credit Service Organization Registration?

Ohio does not require credit service organizations to purchase any form of liability insurance as a prerequisite to obtaining a business registration. Credit service organizations must purchase and maintain a $50,000 surety bond.

How Do Ohio Credit Service Organizations File Their Bond?

Credit service organizations 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 credit service organization. The surety company should include the following information on the bond form:

• Name and address of entity/individual(s) buying the bond
• Surety company’s name and address
• Date the bond goes into effect
• Date the bond is signed

What Can Ohio Credit Service Organizations Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, credit service organizations in Ohio must ensure that they follow all registration 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 Credit Service Organizations in Ohio?

Ohio does not require credit service organizations to purchase 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 other types of 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 Ohio Credit Service Organization Customers?

The NMLS conveniently provides a public database to search for active credit service organizations in Ohio. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.