Rhode Island Loan Broker Bond: A Comprehensive Guide
August 23, 2021
This guide provides information for insurance agents to help their customers obtain Rhode Island Loan Broker Bonds
At a Glance:
- Average Cost: Between 0.75% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Based on the amount of office location the broker operates
- $50,000 for 1 – 3 office locations
- $60,000 for 3 – 7 office locations
- $75,000 for 8 or more office locations
- Who Needs it: All loan brokers operating in Rhode Island
- Purpose: To ensure the public will receive compensation for any damages should the loan broker violate licensing law
- Who Regulates Loan Brokers In Rhode Island: The Rhode Island Department of Business Regulation
Background
Rhode Island statute 19-14-2 requires all loan brokers operating in the state to obtain a license with the Department of Business and Regulation. The Rhode Island legislature enacted the licensing laws and regulations to ensure that loan brokers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, loan brokers must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Rhode Island Loan Broker Bond?
Rhode Island requires loan brokers 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 loan broker fails to comply with the regulations set forth in the Rhode Island Currency Transmissions Act. Specifically, the bond protects the public in the event the broker 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 loan broker breaks licensing laws.
How Can an Insurance Agent Obtain a Rhode Island Loan Broker Surety Bond?
BondExchange makes obtaining a Rhode Island Loan Broker 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 Rhode Island Loan Broker Bond?
Surety companies will run a credit check on the owners of the brokerage firm to determine eligibility and pricing for the Rhode Island Loan Broker 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 Rhode Island Loan Broker Bond Cost?
The Rhode Island Loan Broker Bond can cost anywhere between 0.75% to 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 $50,000 bond requirement.
$50,000 Rhode Island Loan Broker Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $375 |
| 650 – 699 | $500 |
| 625 – 649 | $625 |
| 600 – 624 | $940 |
| 550 – 599 | $2,000 |
| 450 – 549 | $2,500 |
How Does Rhode Island Define “Loan Broker?”
Rhode Island statute 19-14-1 defines a loan broker as any business entity who solicits, processes, negotiates, places, or sells a loan for consumers in the primary market.
How Do Loan Brokers Apply for a License in Rhode Island
Loan brokers in Rhode Island 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 Rhode Island Loan Broker License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Loan brokers must purchase and maintain a surety bond with the following limit:
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- $20,000 for 1 – 3 office locations
- $30,000 for 3 – 7 office locations
- $45,000 for 8 or more office locations
Step 2 – Meet the Net Worth Requirements
Applicants for the Rhode Island Loan Broker License must have a minimum company net worth (assets – liabilities) of at least $10,000. Applicants must submit company financial statements verifying their net worth when submitting their license application.
Step 3 – Hire a Qualifying Individual
Loan brokers must employ a qualifying individual, per branch location, who is responsible for managing the day to day operations of the business. The qualifying individual must have a minimum of five years of industry experience, and be on site for at least 51% of the time the business is open
Step 4 – Request a NMLS Account
The Rhode Island Loan Broker 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 Rhode Island Loan Broker License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
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- Company financial statements indicating a net worth of at least $10,000
- Company formation documents
- Certificate of authority (if incorporated in another state)
- Local municipal registration (if applicable)
- Financial statements for all legal entities who own a 10% stake or higher in the company
Loan brokers must pay a $925 fee when submitting their license application.
How Do Rhode Island Loan Brokers Renew Their License?
Loan brokers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Rhode Island Loan Broker License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Rhode Island Loan Broker License?
Rhode Island does not require loan brokers to purchase any form of liability insurance as a prerequisite to obtaining a business license. Loan brokers must purchase and maintain a surety bond with the following limit:
- $20,000 for 1 – 3 office locations
- $30,000 for 3 – 7 office locations
- $45,000 for 8 or more office locations
How Do Rhode Island Loan Brokers File Their Bond?
Loan brokers 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 brokerage firm. 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 Rhode Island Loan Brokers Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, loan brokers in Rhode Island 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
What Other Insurance Products Can Agents Offer Loan Brokers in Rhode Island?
Rhode Island does not require loan brokers to purchase any form of 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 Rhode Island Loan Broker Customers?
The NMLS conveniently provides a public database to search for active loan brokers in Rhode Island. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
