Alabama Sale of Checks Bond: A Comprehensive Guide

March 1, 2021

This guide provides information for insurance agents to help businesses obtain Alabama Sale of Checks Bonds

At a Glance:

• Average Cost: Between 1% to 12.5% of the bond amount per year based on the licensee’s credit
• Bond Amount: $10,000 for a single location plus an additional $5,000 for each additional location. The bond limit may not exceed $50,000.
• Who Needs It: All individuals and business entities seeking to obtain a Sale of Checks License in the State of Alabama
• Purpose: To ensure the public will receive compensation for any damages should the business fail to comply with licensing law
• Who Regulates Sale of Checks Licenses in Alabama: The Alabama Securities Commission

Background

Alabama Statute 8-7-3 requires businesses who sell checks to obtain a license with the Alabama Securities Commission. The Alabama legislature enacted the licensing laws and regulations to ensure that businesses engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, businesses must purchase and maintain a $10,000 sale of checks surety bond (with an additional $5,000 per location, not exceeding $50,000) to be eligible for licensure.

What is the Purpose of the Alabama Sale of Checks Bond?

Alabama requires businesses to purchase the Sale of Checks Bond as part of the application process to obtain a Sale of Checks license. The bond ensures that the public will receive compensation for financial harm if the business fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the business breaks licensing laws.

How Can an Insurance Agent Obtain an Alabama Sale of Checks Bond?

BondExchange makes obtaining an Alabama Sale of Checks Bond easy. Simply login to your account and use our keyword search to find the “checks” 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 Alabama Sale of Checks Bond?

Surety companies will run a credit check on the owners of the business entity to determine eligibility and pricing for the Alabama Sale of Checks bond. Applicants with excellent credit and work experience can expect to receive the best rates. Applicants 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 Alabama Sale of Checks Bond Cost?

The Alabama Sale of Checks surety 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 the $10,000 bond requirement.

$10,000 Sale of Checks 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.

Who is Required to obtain an Alabama Sale of Checks License

Alabama Statute 8-7-3 requires all businesses who “engage in the business of selling, issuing or otherwise dispensing checks or receiving money as agent for obligors for the purpose of paying such obligors’ bills, invoices or accounts” to obtain a Sale of Checks License.

How Do Businesses Apply for a Sale of Checks License in Alabama?

Businesses in Alabama must navigate several steps to secure their Sale of Checks license. Below are the general guidelines, but businesses should refer to the Security Commission’s licensing page for details on the process.

License Period – The Alabama Sale of Checks License expires on April 1 of each year and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirements

Applicants for the Alabama Sale of Checks License must first amass a company net worth (assets – liabilities) of at least $5,000. Businesses must submit financial statements verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Businesses must purchase and maintain a $10,000 (with an additional $5,000 per location, not exceeding $50,000) surety bond to be eligible for licensure

Step 3 – Complete the Application

All Alabama regulatory Sale of Checks license applications must be mailed to the following address:

Alabama Securities Commission
401 Adams Ave, Suite 280
Montgomery, AL 36104

Businesses must complete the application, including the following steps:

3.a Applicant’s must disclose all branch office locations operating in the State of Alabama

3.b Applicants must also provide a list of all business activities conducted in the state of Alabama, including a list of all clients

3.c All first time applicants must pay the following fees when submitting their license application:

• • $250 investigative fee
  • $250 license application fee, plus an additional $5 per branch location but not exceeding $250

*Applicants applying as a Debt Management Program will need to submit additional documentation with their application. A list of the required documents can be found here.

How Do Businesses Renew The Alabama Sale of Checks License?

Businesses must mail their completed renewal application, including the $250 renewal fee, to the following address:

Alabama Securities Commission
401 Adams Ave, Suite 280
Montgomery, AL 36104

The Alabama Sale of Checks License expires on April 1 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Alabama Sale of Checks License?

The State of Alabama does not require businesses to obtain any form of liability insurance as a prerequisite to obtaining the Sale of Checks License. Businesses must purchase and maintain a $10,000 (with an additional $5,000 per location, not exceeding $50,000) surety bond.

How Do Alabama Businesses File Their Sale of Checks Bond?

Businesses should mail their completed bond form, including the power of attorney, to the following address:

Alabama Securities Commission
401 Adams Ave, Suite 280
Montgomery, AL 36104

The Sale of Checks surety bond requires signatures from both the surety company that issues the bond and the business entity. 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 and state of residence
• Bond amount
• Date the bond is signed and goes into effect

What Can Businesses Do to Avoid Claims Against the Alabama Money Sale of Checks Bond?

To avoid claims on the Sale of Checks Bond, businesses must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:

• Transfer all funds to the rightful party in a timely manner
• Do not engage in any acts of fraud related to check dispensing

What Other Insurance Products Can Agents Offer Sale of Checks Licensees in Alabama?

Alabama does not require businesses to obtain any form of liability insurance prior to obtaining a Sale of Checks 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 Alabama Sale of Checks Licensee Customers?

Alabama unfortunately does not display Sale of Checks Licensee information to the public. We suggest contacting a list service company or the Alabama Secretary of State for a list of active Sale of Checks license holders. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

What other Financial Service Bonds are Required in Alabama?

Alabama requires businesses to purchase specific bonds correlating with their license type. Below are all the different financial services bonds required by the State of Alabama:

• Money Transmitter: Custom bond limit
• Small Loan Company: $1,000 bond limit
• Mortgage Broker: Custom bond limit