Kansas Supervised Loan Bond: A Comprehensive Guide

May 17, 2021

This guide provides information for insurance agents to help supervised lenders obtain Kansas Supervised Loan Bonds

At a Glance:

• Average Cost: Between 0.75% to 5% of the bond amount per year based on the applicant’s credit
• Bond Amount: $100,000 plus an additional $25,000 per branch location to a maximum of $300,000
• Who Needs it: All individuals and business entities seeking to obtain a Supervised Loan License in Kansas
• Purpose: To ensure the public will receive compensation for any damages should the supervised lender fail to comply with licensing law
• Who Regulates Supervised Loans in Kansas: The Kansas Office of the State Bank Commissioner

Background

Kansas statute 16a-2-302 requires all supervised lenders 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 supervised lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, supervised lenders must purchase and maintain a $100,000 surety bond to be eligible for licensure.

What is the Purpose of the Kansas Supervised Loan Bond?

Kansas requires supervised 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 supervised lender fails to comply with the licensing regulations set forth in Kansas statute 16a-2-302. Specifically, the bond protects consumers in the event the supervised lender engages in any acts of fraud or fails to honor agreements made with consumers. In short, the bond is a type of insurance that protects the public if the supervised lender breaks licensing laws.

How Can an Insurance Agent Obtain a Kansas Supervised Loan Surety Bond?

BondExchange makes obtaining a Kansas Supervised Loan Bond easy. Simply login to your account and use our keyword search to find the “loan” 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 Supervised Loan Bond?

Surety companies will run a credit check on the owners of the supervised lending company to determine eligibility and pricing for the Kansas Supervised Loan 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 Supervised Loan Bond Cost?

The Kansas Money Transmitter surety bond can cost anywhere between 0.75% 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 $200,000 bond requirement.

$200,000 Money Transmitter 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 “Supervised Loan?”

Kansas statute 16a-1-301 defines a supervised loan as any consumer loan with an annual percentage rate exceeding 12%. Individuals and businesses who issued supervised loans are subject to licensing requirements.

How do Supervised Lenders Apply for a License in Kansas?

Supervised lenders 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 Supervised Loan 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 Kansas Supervised Loan License must have a company net worth (assets – liabilities) of at least $500,000. Applicants must submit a financial statement verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Supervised lenders must purchase and maintain a surety bond with a limit of $100,000 plus an additional $25,000 per branch location to a maximum of $300,000

Step 3 – Request a NMLS Account

The Kansas Supervised Loan 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 Kansas Supervised Lender License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Financial statements indicating a company net worth of at least $500,000
  • Primary company and consumer complaint contact information
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure the applicant intends to employ
  • Certificate of Good Standing obtained from the Kansas Secretary of State
  • Company formation documents
  • Management chart displaying the company’s hierarchy
  • Organizational chart detailing the company’s ownership structure
  • List of all company branch locations
  • Credit notification filing
  • Company hiring practices and personnel screening procedures

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

• • $650 application fee
  • $100 NMLS processing fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)

How Do Kansas Supervised Lenders Renew Their License?

Supervised lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Kansas Supervised Loan License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Kansas Supervised Loan License?

The State of Kansas does not require supervised lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Supervised lenders must purchase and maintain a surety bond with a limit of $100,000 plus an additional $25,000 per branch location to a maximum of $300,000.

How Do Kansas Supervised Lenders File Their Bond?

Supervised 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 supervised lending company. The surety company should include the following information on the bond form:

• Legal name and NMLS number of entity/individual(s) buying the bond
• Surety company’s name
• Bond amount
• Date the bond is signed

What Can Kansas Supervised Lenders Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, supervised lenders in Kansas 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
• Honor all agreements made with consumers

What Other Insurance Products Can Agents Offer Supervised Lenders in Kansas?

Kansas does not require supervised lenders 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 Supervised Lender Customers?

The NMLS conveniently provides a public database to search for active supervised lenders 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.