Tennessee Flexible Credit Lender Bond: A Comprehensive Guide

August 26, 2021

This guide provides information for insurance agents to help their customers obtain Tennessee Flexible Credit Lender Bonds

At a Glance:

• Average Cost: Between 1.5% to 7.5% of the bond amount per year based on the applicant’s credit
• Bond Amount: $25,000 per office location to a maximum of $200,000
• Who Needs it: All flexible credit lenders operating in Tennessee
• Purpose: To ensure the public will receive compensation for any damages should the flexible credit lender violate licensing law
• Who Regulates Flexible Credit Lenders In Tennessee: The Tennessee Department of Financial Institutions

Background

Tennessee statute 45-12-103 requires all flexible credit lenders operating in the state to obtain a license with the Department of Financial Institutions. The Tennessee legislature enacted the licensing laws and regulations to ensure that flexible credit lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, flexible credit lenders must purchase and maintain a $25,000 surety bond (per location) to be eligible for licensure.

What is the Purpose of the Tennessee Flexible Credit Lender Bond?

Tennessee requires flexible credit 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 flexible credit lender fails to comply with the regulations set forth in the Tennessee Flexible Credit Act. Specifically, the bond protects the public in the event the flexible credit 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 flexible credit lender breaks licensing laws.

How Can an Insurance Agent Obtain a Tennessee Flexible Credit Lender Surety Bond?

BondExchange makes obtaining a Tennessee Flexible Credit Lender 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 Tennessee Flexible Credit Lender Bond?

Surety companies will run a credit check on the owners of the lending company to determine eligibility and pricing for the Tennessee Flexible Credit 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 Tennessee Flexible Credit Lender Bond Cost?

The Tennessee Flexible Credit Lender Bond can cost anywhere between 1.5% to 7.5% 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 the $25,000 bond requirement.

$25,000 Flexible Credit Lender Bond Cost

How Does Tennessee Define “Flexible Credit Lender?”

To paraphraseTennessee statute 45-12-102, a flexible credit lender is any business entity who issues open-ended credit plans that meet the following conditions:

• Are unsecured or secured by personal property
• May be without fixed maturities or limitations as to the length of the term
• Are subject to prepayment in whole or in part at any time without penalty

How do Flexible Credit Lenders Apply for a License in Tennessee?

Flexible credit lenders in Tennessee 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 Tennessee Flexible Credit Lender 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 Tennessee Flexible Credit Lender License must have a company net worth (assets – liabilities) of at least $50,000. Applicants must submit an audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Flexible Credit Lenders must purchase and maintain a surety bond with a limit of $25,000 per office location to a maximum of $200,000

Step 3 – Request a NMLS Account

The Tennessee Flexible Credit Lenders 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 Tennessee Flexible Credit Lenders License applications can be uploaded electronically through the NMLS. Flexible credit lenders must complete the application in its entirety, and submit the following items:

• • Audited company financial Statements indicating a net worth of at least $50,000
  • Other Trade Name
  • Primary company and consumer complaint contacts
  • Disclosure Questions
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure
  • Certificate Good Standing
  • Company formation documents
  • Company management and organizational charts
  • Organizational Chart/Description
  • Detailed resumes for all control persons

Flexible credit lenders must pay the following fees when submitting their license application:

• • $1,000 application fee
  • $100 NMLS processing fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)

How Do Tennessee Flexible Credit Lenders Renew Their License?

Flexible credit lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Tennessee Flexible Credit Lender License is valid for one year from the date of issuance and must be renewed before the expiration date.

What Are the Insurance Requirements for the Tennessee Flexible Credit Lender License?

Tennessee does not require flexible credit lenders to purchase any form of liability insurance as a prerequisite to obtaining a business license. Flexible Credit Lenders must purchase and maintain a surety bond with a limit of $25,000 per office location to a maximum of $200,000.

How Do Tennessee Flexible Credit Lenders File Their Bond?

Tennessee flexible credit 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:

• Legal name and address of entity/individual(s) buying the bond
• Surety company’s name county, and state of incorporation
• Bond amount
• Date the bond is signed
• Date the bond goes into effect

What Can the Tennessee Flexible Credit Lender Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, flexible credit lenders in Tennessee must follow all license regulations in the state, including some of the most important issues below that tend to cause claim

• Do not engage in any acts of fraud
• Do not breach any contracts made with consumers

What Other Insurance Products Can Agents Offer Flexible Credit Lenders in Tennessee?

Tennessee does not require flexible credit lenders 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 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 Tennessee Flexible Credit Lender Customers?

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