Washington Collection Agency Bond: A Comprehensive Guide

September 7, 2021

This guide provides information for insurance agents to help their customers obtain a Washington Collection Agency Bond

At a Glance:

• Average Cost: Between $125 to $250 per year based on the applicant’s credit
• Bond Amount: $5,000
• Who Needs it: All collection agencies operating in Washington
• Purpose: To ensure the public will receive compensation for any damages should the collection agency fail to comply with licensing law
• Who Regulates Collection Agencies In Washington: The Washington Department of Revenue

Background

Washington statute 19.16.110 requires all collection agencies operating in the state to obtain a license with the Department of Revenue. The Washington legislature enacted the licensing laws and regulations to ensure that collection agencies engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, collection agencies must purchase and maintain a $5,000 surety bond to be eligible for licensure.

What is the Purpose of the Washington Collection Agency Bond?

Washington requires collection agencies 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 collection agency fails to comply with the licensing regulations set forth in Washington RCW Title 19 Chapter 19.16. Specifically, the bond protects the public in the event the collection agency breaches any contracts made with consumers or fails to pay funds owed to collectors. In short, the bond is a type of insurance that protects the public if the collection agency breaks licensing laws.

How Can an Insurance Agent Obtain a Washington Collection Agency Surety Bond?

BondExchange makes obtaining a Washington Collection Agency Bond easy. Simply login to your account and use our keyword search to find the “collection” 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 Washington Collection Agency Bond?

Surety companies will run a credit check on the owners of the collection agency to determine eligibility and pricing for the Washington Collection Agency 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 Washington Collection Agency Bond Cost?

The Washington Collection Agency Bond can cost anywhere between $125 to $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 $5,000 bond requirement.

$5,000 Collection Agency Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does Washington Define “Collection Agency”?

Washington Statute 19.16.100 defines a collection agency as any business entity who engages in one or more of the following activities:

• Collects debts owed to another party
• Sells forms used for collection purposes
• Collects their own debts using a fictitious name
• Buys debt for the purpose of collecting

How Do Collection Agencies Apply for a License in Washington?

Collection agencies in Washington must navigate several steps to secure their license. Below are the general guidelines, but collectors should refer to the application form for details on the process.

License Period – The Washington Collection Agency License is valid for one year from the date of issuance and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Collection agencies must purchase and maintain a $5,000 surety bond

Step 2 – Meet the Net Worth and Cash Requirements

Applicants for the Washington Collection Agency License must maintain a company net worth (assets-liabilities) of at least $7,500. Collection agencies must also have at least $7,500 in cash on hand, with a minimum of $5,000 deposited in a business banking account.

Step 3 – Establish a Trust Account

All in-state collection agencies must establish a trust account with a federally insured banking institution and is used to store all funds collected from debtors.

Step 4 – Complete the Application

Washington requires collection agencies to obtain both a standard business license and a collection agency license. All license applications can be completed electronically here. Collection agencies must pay the following fees when submitting their license applications:

• • $90 business license application fee
  • $850 collection agency endorsement ($425 for out of state applicants)
  • $550 branch location endorsement ($275 for out of state applicants)

How Do Washington Collection Agencies Renew Their License?

Collection agencies can renew their license online here. The Washington Collection Agency License is valid for one year from the date of issuance and must be renewed before the expiration date.

Collection agencies must pay the following fees when submitting their renewal application:

• Collection agency renewal fees
  • Main office license renewal $475
  • Branch office license renewal $300
• Out-of-state collection agency renewal fees
  • Main office license renewal $237.50
  • Branch office license renewal $150

What Are the Insurance Requirements for the Washington Collection Agency License?

The State of Washington does not require collection agencies to obtain any form of liability insurance as a prerequisite to obtaining a business license. Collection agencies must purchase and maintain a $5,000 surety bond.

How Do Washington Collection Agencies File Their Bond?

Collectors should submit the completed bond form, including the power of attorney, electronically here. The collection agency surety bond requires signatures from both the surety company that issues the bond and a representative from the collection agency. 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, address, phone number, and email address
• Bond amount
• Date the bond is signed and goes into effect

What Can Washington Collection Agencies Do to Avoid Claims Against their Bond?

To avoid claims made against their bond, collection agencies in Washington must follow all license regulations in the state, including some of the most important issues below that, tend to cause claims:

• Pay all funds owed to creditors
• Do not breach any contracts made with consumers

What Other Insurance Products Can Agents Offer Collection Agencies in Washington?

Washington does not require collection agencies to obtain any form of liability insurance as a prerequisite to obtaining a business license. However, most reputable agencies 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 Washington Collection Agency Customers?

Washington conveniently provides a public database to search for active collection agencies 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