Virginia Debt Settlement Service Bond: A Comprehensive Guide
August 30, 2021
This guide provides information for insurance agents to help their customers obtain Virginia Debt Settlement Service Bonds
At a Glance:
- Average Cost: Between $375 to $1,250 per year based on the applicant’s credit
- Bond Amount: $25,000
- Who Needs it: All debt settlement service providers operating in Virginia
- Purpose: To ensure the public will receive compensation for any damages should the debt settlement service provider fail to comply with licensing law
- Who Regulates Debt Settlement Service Providers In Virginia: The Virginia State Corporation Commission
Background
Virginia statute 6.2-2027 requires all debt settlement service providers operating in the state to obtain a license with the State Corporation Commission. The Virginia legislature enacted the licensing laws and regulations to ensure that debt settlement service providers engage in ethical business practices. To provide financial security for the enforcement of the licensing law, debt settlement service providers must purchase and maintain a $25,000 surety bond to be eligible for licensure.
What is the Purpose of the Virginia Debt Settlement Service Bond?
Virginia requires debt settlement service providers 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 debt settler fails to comply with the regulations outlined in Virginia statutes Title 6.2 Chapter 20.1. Specifically, the bond protects the public in the event the debt settler engages in any acts of fraud or mishandles consumer funds. In short, the bond is a type of insurance that protects the public if the debt settlement service provider breaks licensing laws.
How Can an Insurance Agent Obtain a Virginia Debt Settlement Service Surety Bond?
BondExchange makes obtaining a Virginia Debt Settlement Service Bond easy. Simply login to your account and use our keyword search to find the “debt” 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 Virginia Debt Settlement Service Bond?
Surety companies will run a credit check on the owners of the debt settlement company to determine eligibility and pricing for the Virginia Debt Settlement Service 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 Virginia Debt Settlement Service Bond Cost?
The Virginia Debt Settlement Service bond can cost anywhere between $375 to $1,250 per year. Insurance companies determine the rate based on several 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 Debt Settlement Service Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 800+ | $375 |
| 650 – 799 | $500 |
| 600 – 649 | $1,000 |
| 450 – 599 | $1,250 |
How Does Virginia Define “Debt Settlement Service Provider?”
Virginia statute 6.2-2026 defines a debt settlement service provider as any business entity who negotiates, on a consumer’s behalf, with a creditor for the purposes of reducing the consumer’s debt obligations.
How do Debt Settlement Service Providers Apply for License in Virginia?
Debt settlement service providers in Virginia must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the application form for details on the process.
License Period – The Virginia Debt Settlement Services license will not expire unless surrendered, suspended, or revoked
Step 1 – Purchase a Surety Bond
Debt settlement services providers must purchase and maintain a $25,000 surety bond
Step 2 – Complete the Application
All Virginia Debt Settlement Services License applications should be mailed to the following address:
Bureau of Financial Institutions
State Corporation Commission
1300 East Main Street, Suite 800
Post Office Box 640
Richmond, Virginia 23218-0640
Debt settlers must complete the application in its entirety, and submit the following items:
-
- Organizational chart detailing the company’s hierarchy
- Personal Financial Report and Disclosure Statement for each senior company officer
- Employment and Business Affiliation Disclosure for each company director/officer
- Company financial statements as well as financial statements for all businesses owning a 10% interest or more in the company applying for licensure
- Company business plan
- Copy of the company’s standard debt settlement agreement
- Evidence that the company’s credit counselors are certified
- Depository Institution Authorization
- Evidence of Registration with the Clerk of the State Corporation Commission
- Description of how the company will avoid conflicts of interest
- Three business reference letters
Debt settlers must pay a $500 fee when submitting their license application.
Do Virginia Debt Settlement Service Providers Need to Renew Their License?
No, because the Virginia Debt Settlement Services License will not expire unless surrendered, suspended, or revoked
What Are the Insurance Requirements for the Virginia Debt Settlement Services License?
The State of Virginia does not require debt settlement service providers to obtain any form of liability insurance as a prerequisite to obtaining a business license. Debt settlers must purchase and maintain a $25,000 surety bond.
How Do Virginia Debt Settlement Service Providers File Their Bond?
Virginia debt settlement service providers should mail the completed bond form, including the power of attorney, to the following address:
Bureau of Financial Institutions
State Corporation Commission
1300 East Main Street, Suite 800
Post Office Box 640
Richmond, Virginia 23218-0640
The Virginia debt settlement service surety bond requires signatures from both the surety company that issues the bond and a representative from the debt settlement company. The surety company should include the following information on the bond form:
- Legal name of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond is signed
What Can Virginia Debt Settlement Service Providers Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, debt settlers in Virginia 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 breach any contracts made with consumers
What Other Insurance Products Can Agents Offer Debt Settlement Service Providers in Virginia?
Virginia does not require debt settlement service providers 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 Virginia Debt Settlement Service Provider Customers?
Virginia conveniently provides a public database to search for active debt settlement service providers in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
