Kansas Credit Service Organization Bond: A Comprehensive Guide

May 14, 2021

This guide provides information for insurance agents to help credit service organizations obtain Kansas Credit Service Organization Bonds

At a Glance:

• Average Cost: Between 1% to 5% of the bond amount per year based on the applicant’s credit
• Bond Amount: $25,000, though the State Bank Commissioner may increase the limit to a maximum of $1 million at his/her discretion
• Who Needs it: All credit service organizations operating in Kansas
• Purpose: To ensure the public will receive compensation for any damages should the credit service organization fail to comply with licensing law
• Who Regulates Credit Service Organizations in Kansas: The Kansas Office of the State Bank Commissioner

Background

Kansas statute 50-118 requires all credit service organizations operating in the state to obtain a license with the Office of the State Bank Commissioner. The Kansas legislature enacted the licensing laws and regulations to ensure that credit service organizations engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, credit service organizations must purchase and maintain a $25,000 surety bond to be eligible for licensure.

What is the Purpose of the Kansas Credit Service Organization Bond?

Kansas requires credit service organizations 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 credit service organizations fail to comply with the licensing regulations set forth in the Kansas Consumer & Mortgage Lending Law Book. Specifically, the bond protects consumers in the event the credit service organization engages in any acts of fraud or doesn’t honor any agreements made. In short, the bond is a type of insurance that protects the public if the credit service organization breaks licensing laws.

How Can an Insurance Agent Obtain a Kansas Credit Service Organization Surety Bond?

BondExchange makes obtaining a Kansas Credit Service Organization 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 Kansas Credit Service Organization Bond?

Surety companies will run a credit check on the owners of the credit service organization to determine eligibility and pricing for the Kansas Credit Service Organization bond. Owner’s 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 Kansas Credit Service Organization Bond Cost?

The Kansas Credit Service Organization surety bond can cost anywhere between 1% 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 the $25,000 bond requirement.

$25,000 Credit Service Organization 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 Kansas Define “Credit Service Organization?”

Kansas statute 50-1117 defines a credit service organization as any individual or business entity who provides one or more of the following services:

• Receives or offers to receive funds from a consumer for the purpose of distributing the funds among such consumer’s creditors in full or partial payment of such consumer’s debts
• Improves or offering to improve a consumer’s credit record, history, rating or score
• Negotiates or offers to negotiate to defer or reduce a consumer’s obligations with respect to credit extended by others.

How do Credit Service Organizations Apply for a License in Kansas?

Credit service organizations in Kansas 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 Kansas Credit Service Organization License expires on April 30 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Credit service organizations must purchase and maintain a $25,000 surety bond

Step 2 – Request a NMLS Account

The Kansas Credit Service Organization 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 3 – Complete the Application

All Kansas Credit Service Organization License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Audited company financial statements prepared by a CPA
  • Primary company and consumer complaint contact information
  • Information for the company’s primary letter of credit, operating, and/or trust bank account(s)
  • Company business plan detailing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure the licensee intends to employ
  • Certificate of Good Standing obtained from the Kansas Secretary of State
  • Company staffing and internal policies
  • Copy of a debt management agreement
  • Sample company education plan and materials
  • Company formation documents
  • Management chart detailing the company’s hierarchy
  • Organizational chart detailing the company’s ownership structure
  • Authorization to examine all company trust accounts used to hold funds for others

Credit service organizations must pay a $15 credit report fee when submitting their license application.

How Do Kansas Credit Service Organizations Renew Their License?

Credit service organizations can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Kansas Credit Service Organization License expires on April 30 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Kansas Credit Service Organization License?

The State of Kansas does not require credit service organizations to obtain any form of liability insurance as a prerequisite to obtaining a business license. Credit service organizations must purchase and maintain a $25,000 surety bond.

How Do Kansas Credit Service Organizations File Their Bond?

Credit service organizations 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 credit service organization. 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 goes into effect
• Date the bond is signed

What Can Kansas Credit Service Organizations do to Avoid Claims Against Their Bond?

To avoid claims on their bond, credit service organizations in Kansas must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:

• Honor all agreements made with consumers
• Do not engage in any acts of fraud

What Other Insurance Products Can Agents Offer Credit Service Organizations in Kansas?

Kansas does not require credit service organizations 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 Kansas Credit Service Organization Customers?

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