Ohio Short Term Lender Bond: A Comprehensive Guide

August 6, 2021

This guide provides information for insurance agents to help their customers obtain Ohio Short Term 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 for non-profit short term lenders
  • $100,000 for all other short term lenders
• Who Needs it: All short term lenders operating in Ohio
• Purpose: To ensure the public will receive compensation for any damages should the short term lender violate licensing law
• Who Regulates Short Term Lenders In Ohio: The Ohio Division of Financial Institutions

Background

Ohio statute 1321.36 requires all short term lenders operating in the state to obtain a license with the Division of Financial Institutions. The Ohio legislature enacted the licensing laws and regulations to ensure that short term lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, short term lenders must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Ohio Short Term Lender Bond?

Ohio requires short term 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 short term lender fails to comply with the regulations set forth in Ohio statute 1321.37. Specifically, the bond protects the public in the event the short term lender 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 short term lender breaks licensing laws.

How Can an Insurance Agent Obtain an Ohio Short Term Lender Surety Bond?

BondExchange makes obtaining an Ohio Short Term Lender Bond easy. Simply login to your account and use our keyword search to find the “short” 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 Short Term Lender Bond?

Surety companies will run a credit check on the owners of the lending company to determine eligibility and pricing for the Ohio Short Term 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 Ohio Short Term Lender Bond Cost?

The Ohio Short Term Lender 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 both the $50,000 and $100,000 bond requirements.

$50,000 Short Term Lender Bond Cost

$100,000 Short Term Lender Bond Cost

How Does Ohio Define “Short Term Lender?”

To paraphrase Ohio statute 1321.39, a short term lender is any business entity who issues loans that satisfy all of the following conditions:

• Loan amount does not exceed $1,000
• Minimum loan duration is 91 days and the maximum loan duration is one year

Banks, trust companies, and credit unions are exempt from this definition.

How Do Short Term Lenders Apply For a License In Ohio

Short Term Lenders in Ohio must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines (click here for non-profits) for details on the process.

License Period – The Ohio Short Term Lender License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirement

Applicants for the Ohio Short Term Lender license must maintain a company net worth (assets – liabilities) of at least $100,000 ($50,000 for nonprofits). Short term lenders must submit financial statements verifying their net worth with their license application.

Step 2 – Purchase a Surety Bond

Short term lenders must purchase and maintain a surety bond with the following limit:

• • $50,000 for non-profit short term lenders
  • $100,000 for all other short term lenders

Step 3 – Hire a Qualifying Individual

Short term lenders must employ a qualifying individual who is capable of handling the day to day operations of the lending business. Qualifying individuals must be hired as an office manager and be in a supervisory role.

Step 4 – Request a NMLS Account

The Ohio Short Term Lender 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 Ohio Short Term Lender License applications  (click here for non-profits)can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Financial statements indicating a company net worth of at least $100,000 ($50,000 for non-profits)
  • The following company contacts:
    • Primary company
    • Primary consumer complaint
    • Primary examination
  • Disclosure questions
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure
  • Business continuity plan
  • Certificate of Good Standing
  • Company staffing and internal policies
  • The following document samples and information:
    • Sample loan contracts
    • Borrower’s recommended loan term
    • Borrower’s declaration of eligibility
    • Anti-virus software
    • Company business hours
    • Other types of business conducted at the location
  • Company formation documents
  • Management and organizational charts
  • Ohio attestation

Short term lenders must pay the following fees when submitting their license application:

• • $1,000 license fee if application is submitted between January 1 – June 30
  • $500 license fee if application is submitted between July 1 – December 31
  • $200 investigation fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)

How Do Ohio Short Term Lenders Renew Their License?

Short term lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Ohio Short Term Lender License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Ohio Short Term Lender License?

Ohio does not require short term lenders to purchase any form of liability insurance as a prerequisite to obtaining a business license. Short term lenders must purchase and maintain a surety bond with the following limit:

• • $50,000 for non-profit short term lenders
  • $100,000 for all other short term lenders

How Do Ohio Short Term Lenders File Their Bond?

Short term lenders 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 lending company. 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
• Bond amount
• Date the bond goes into effect
• Date the bond is signed

What Can Ohio Short Term Lenders Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, short term lenders in Ohio must ensure that they 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 breach any contracts made with consumers
• Do not charge prohibited fees

What Other Insurance Products Can Agents Offer Short Term Lenders in Ohio?

Ohio does not require short term lenders to purchase any form of liability liability insurance as a prerequisite to obtaining a business license. 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 Short Term Lender Customers?

The NMLS conveniently provides a public database to search for active short term lenders 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.