Maryland Credit Services Bond: A Comprehensive Guide

May 28, 2021

This guide provides information for insurance agents to help their customers obtain Maryland Credit Services Bonds

At a Glance:

• Average Cost: Between $750 to $2,500 per year based on the applicant’s credit
• Bond Amount: $50,000
• Who Needs it: All credit services businesses operating in Maryland
• Purpose: To ensure the public will receive compensation for any damages should the credit services business fail to comply with licensing law
• Who Regulates Credit Services Businesses in Maryland: The Maryland Commissioner of Financial Regulation

Background

Maryland statute 14-1903 requires all credit services businesses operating in the state to obtain a license with the Commissioner of Financial Regulation. The Maryland legislature enacted the licensing laws and regulations to ensure that credit services businesses engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, credit services businesses must purchase and maintain a $50,000 surety bond to be eligible for licensure.

What is the Purpose of the Maryland Credit Services Bond?

Maryland requires credit services businesses 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 services business fails to comply with the licensing regulations set forth in Maryland statutes 14-1901-1916. Specifically, the bond protects the public in the event the credit services business engages in any acts of fraud or breaches contracts made with consumers. In short, the bond is a type of insurance that protects the public if the credit services business breaks licensing laws.

How Can an Insurance Agent Obtain a Maryland Credit Services Surety Bond?

BondExchange makes obtaining a Maryland Credit Services 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 Maryland Credit Services Bond?

Surety companies will run a credit check on the owner’s of the credit services business to determine eligibility and pricing for the Maryland Credit Services 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 Maryland Credit Services Bond Cost?

The Maryland Credit Services surety bond can cost anywhere between $750 to $2,500 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 Credit Services 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 Maryland Define “Credit Services Business?”

Maryland statute 14-1901 defines a credit services business as any business entity who performs one or more of the following business activities:

• Improves a consumer’s credit record, history, or rating or establishes a new credit file or record, or provides advice or assistance to a consumer with regard to improving the consumer’s credit record, history, or rating or establishing a new credit file or record
• Obtains an extension of credit for a consumer, or provides advice or assistance to a consumer with regard to obtaining an extension of credit
• Sells or attempts to sell written materials containing information that the person represents will enable a consumer to establish a new credit file or record

Exemptions to this definition include:

• Businesses authorized to make loans or extensions of credit
• Financial institutions whose deposits are eligible for insurance by any credit union
• Non-profit organizations
• Real estate brokers and salespersons
• Mortgage lenders
• Individuals to the Bar of the Court of Appeals of Maryland
• Broker-dealers registered with the Securities Exchange Commission or the Commodity Futures Trading Commission
• Consumer reporting agencies
• Individuals licensed by the Maryland Board of Public Accountancy

How do Credit Services Businesses Apply for a License in Maryland?

Credit services businesses in Maryland 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 Maryland Credit Services Business License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Meet the Liquid Asset Requirements

Applicants for the Maryland Credit Services Business License must have a minimum of $20,000 in liquid assets available to be utilized by the company. Applicants must submit either a financial statement or a verified liquid asset letter confirming the availability of the funds when submitting their license application.

Step 2 – Purchase a Surety Bond

Credit services businesses must purchase and maintain a $50,000 surety bond

Step 3 – Request a NMLS Account

The Maryland Credit Services 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 Maryland Credit Services Business License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Financial statements or verified liquid asset letter confirming the company has a minimum of $20,000 in liquid assets
  • Primary company and consumer complaint contact information
  • Company business plan (see the application form for the required information)
  • Certificate of Good Standing
  • Company staffing and internal policies
  • The following document samples:
    • Maryland disclosures
    • Information statement
    • Contract used with consumers
  • Company formation documents
  • Management chart detailing the company’s hierarchy
  • Organizational chart detailing the company’s ownership structure
  • Trust account authorization
  • Memorandum of Tax Certification confirming all Maryland tax obligations have been met
  • Personal financial statements for all individuals with at least a 10% company ownership interest

Credit services business must pay the following fees when submitting their license application:

• • $850 license fee
  • $100 application fee

How Do Maryland Credit Services Businesses Renew Their License?

Credit services businesses can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Maryland Credit Services Business License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Maryland Credit Services Business License?

The State of Maryland does not require credit services businesses to obtain any form of liability insurance as a prerequisite to obtaining a business license. Credit services businesses must purchase and maintain a $50,000 surety bond.

How Do Maryland Credit Services Businesses File Their Bond?

Credit services businesses 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 services services business. 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 address
• Bond amount
• Date the bond goes into effect
• Date the bond is signed

What Can Maryland Credit Services Businesses Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, credit services businesses in Maryland 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
• Do not breach any contracts made with consumers

What Other Insurance Products Can Agents Offer Credit Services Businesses in Maryland?

Maryland does not require credit services businesses 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 Maryland Credit Services Businesses Customers?

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