Maine Payday Lender Bond: A Comprehensive Guide
June 21, 2021
This guide provides information for insurance agents to help their customers obtain Maine Payday Lender Bonds
At a Glance:
- Average Cost: Between 1.5% to 7.5% of the bond amount per year based on the applicant’s credit
- Bond Amount: $50,000 per office location
- Who Needs it: All payday lenders operating in Maine
- Purpose: To ensure the public will receive compensation for any damages should the payday lender fail to comply with licensing law
- Who Regulates Payday Lenders in Maine: The Maine Bureau of Consumer Credit Protection
Background
Maine statute 1-201 requires all payday lenders operating in the state to obtain a license with the Bureau of Consumer Credit Protection. The Maine legislature enacted the licensing laws and regulations to ensure that payday lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, payday lenders must purchase and maintain a $50,000 surety bond (per office location) to be eligible for licensure.
What is the Purpose of the Maine Payday Lender Bond?
Maine requires payday 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 payday lender fails to comply with the regulations set forth in Maine regulations 9-A M.R.S.A. Specifically, the bond protects the public in the event the payday lender engages in any acts of fraud or fails to pay all required taxes and fees. In short, the bond is a type of insurance that protects the public if the payday lender breaks licensing laws.
How Can an Insurance Agent Obtain a Maine Payday Lender Surety Bond?
BondExchange makes obtaining a Maine Payday Lender Bond easy. Simply login to your account and use our keyword search to find the “payday” 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 Maine Payday Lender Bond?
Surety companies will run a credit check on the owner’s of the lending company to determine eligibility and pricing for the Maine Payday Lender 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 Maine Payday Lender Bond Cost?
The Maine Payday Lender bond can cost anywhere between 1.5% to 7.5% 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 $50,000 bond requirement.
$50,000 Payday Lender Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 800+ | $750 |
| 650 – 799 | $1,000 |
| 600 – 649 | $2,000 |
| 550 – 599 | $3,750 |
How Does Maine Define “Payday Lender?”
Maine statute 1-301 defines a payday lender as any individual or business entity who issues a cash advance to a consumer in exchange for the consumer’s personal check or authorization to debit the consumer’s deposit account on a designated date.
How do Payday Lenders Apply for a License in Maine?
Payday lenders in Maine 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 Maine Payday Lender License is valid for two years and must be renewed before the expiration date
Step 1 – Meet the Net Asset Requirements
Applicants for the Maine Payday Lender License must have a minimum of $25,000 in net assets for each licensed office location. Applicants must submit sworn financial statements verifying their net assets when submitting their license application.
Step 2 – Purchase a Surety Bond
Payday lenders must purchase and maintain a $50,000 surety bond for each licensed location
Step 3 – Complete the Application
All regulatory Maine Payday Lender License applications should be mailed to the following address:
State of Maine
Bureau of Consumer Credit Protection
35 State House Station
Augusta, Maine 04333-0035
Payday lenders must complete the application in its entirety, and submit the following items:
-
- Sworn financial statements indicating company net assets of at least $25,000 per office location
- Contact information for the following company personnel:
- Schedular of Compliance Examinations
- Consumer complaint resolution
- Copy of the company’s quality control program
- Resumes for the top three principal officers of the company
Payday lenders must pay a $500 license fee, plus an additional $200 per office location when submitting their application.
How Do Maine Payday Lenders Renew Their License?
Payday lenders should mail their completed renewal application, along with the $500 license fee (plus $200 per additional office location), to the following address:
State of Maine
Bureau of Consumer Credit Protection
35 State House Station
Augusta, Maine 04333-0035
The Maine Payday Lender License is valid for two years and must be renewed before the expiration date.
What Are the Insurance Requirements for the Maine Payday Lender License?
The State of Maine does not require payday lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Payday lenders must purchase and maintain a $50,000 surety bond.
How Do Maine Payday Lenders File Their Bond?
Payday lenders should mail the completed bond form, including the power of attorney, to the following address:
State of Maine
Bureau of Consumer Credit Protection
35 State House Station
Augusta, Maine 04333-0035
The payday lender surety bond requires signatures from both the surety company that issues the bond and a representative from the lending company. 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 incorporation
- Bond amount
- Date the bond is signed
What Can Maine Payday Lenders Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, payday lenders in Maine 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 contractual obligations with consumers
- Pay all required taxes and fees
What Other Insurance Products Can Agents Offer Payday Lenders in Maine?
Maine does not require payday 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 Maine Payday Lender Customers?
Maine conveniently provides a public database to search for active payday lenders 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.
