Maryland Debt Management Services Bond: A Comprehensive Guide
May 28, 2021
This guide provides information for insurance agents to help their customers obtain Maryland Debt Management Services Bonds
*Important Note: Debt management Service Providers are required to purchase a fidelity bond in addition to the business license surety bond outlined in this page. Contact BondExchange for more information on the fidelity bond requirement
At a Glance:
- Average Cost: Between 1.5% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Between $10,000 to $1 million (more on this later)
- Who Needs it: All debt management services providers operating in Maryland
- Purpose: To ensure the public will receive compensation for any damages should the debt management services provider fail to comply with licensing law
- Who Regulates Debt Management Services Providers in Maryland: The Maryland Commissioner of Financial Regulation
Background
Maryland statute 12-096 requires all debt management services providers 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 debt management services providers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, debt management services providers must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Maryland Debt Management Services Bond?
Maryland requires debt management services providers 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 debt management services provider fails to comply with the licensing regulations set forth in Maryland statutes 12-901-931. Specifically, the bond protects the public in the event the debt management services provider engages in any acts of fraud or fails to pay all funds received from consumers to the appropriate creditors. In short, the bond is a type of insurance that protects the public if the debt management services provider breaks licensing laws.
How Can an Insurance Agent Obtain a Maryland Debt Management Services Provider Surety Bond?
BondExchange makes obtaining a Maryland Debt Management Services Provider Bond easy. Simply login to your account and use our keyword search to find the “debt” 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.
How is the Bond Amount Determined?
Maryland statute 12-914 states that the limit on the Maryland Debt Management Services Bond must be between $10,000 to $1 million. Debt management services providers will be informed of their required bond limit during the licensing process. The Commissioner of Financial Regulation will determine the applicant’s bond amount based on the applicant’s annual volume of payments made to creditors on behalf of Maryland consumers. The debt management services provider’s required bond limit is subject to change each license renewal period.
Is a Credit Check Required for the Maryland Debt Management Services Bond?
Surety companies will run a credit check on the owner’s of the debt management services company to determine eligibility and pricing for the Maryland Debt Management 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 Debt Management Services Bond Cost?
The Maryland Debt Management Services surety bond can cost anywhere between 1.5% 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 a $10,000 bond requirement.
$10,000 Debt Management Services Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 800+ | $150 |
| 650 – 799 | $200 |
| 600 – 649 | $400 |
| 450 – 599 | $500 |
*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 “Debt Management Services Provider?”
Maryland statute 12-901 defines a debt management services provider as any business entity who “receives funds periodically from a consumer under an agreement with the consumer for the purpose of distributing the funds among the consumer’s creditors in full or partial payment of the consumer’s debts.”
How do Debt Management Services Providers Apply for a License in Maryland?
Debt management services providers 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 Debt Management Services 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 Maryland Debt Management Services License must have a company net worth (assets – liabilities) of at least $50,000, plus an additional $10,000 per branch location to a maximum requirement of $500,000. Applicants must submit an audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Debt management services providers must purchase and maintain a surety bond with a minimum limit of $10,000 (the limit requirements are explained in detail in the above section)
Step 3 – Request a NMLS Account
The Maryland Debt Management 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 Debt Management Services License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
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- Audited financial statements indicating the company’s net worth
- Primary company and consumer complaint contact information
- Bank account information for the company’s operating and trust account(s)
- Company business plan (see application guidelines for required information)
- Certificate of Good Standing
- Company staffing and internal policies
- Sample debt management agreement between the company and a consumer
- Sample acknowledgement form
- 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
- Resume detailing any relevant experience by company owners
Debt management services providers must pay the following fees when submitting their license application:
-
- License fee based off of the company’s annual gross revenue:
| Annual Gross Revenue | License Fee |
|---|---|
| $3 million or less | $500 |
| Over $3 million to $6 million | $1,000 |
| Over $6 million to $15 million | $2,000 |
| Over $15 million to $30 million | $3,000 |
| Over $30 million | $4,000 |
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- $1,000 application fee
- $36.25 background check fee (per person)
How Do Maryland Debt Management Service Providers Renew Their License?
Debt management service providers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Maryland Debt Management Services License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Maryland Debt Management Services License?
The State of Maryland does not require debt management services providers to obtain any form of liability insurance as a prerequisite to obtaining a business license. Debt management services providers must purchase and maintain a surety bond with a minimum limit of $10,000 (the limit requirements are explained in detail in the above section).
How Do Maryland Debt Management Services Providers File Their Bond?
Debt management services providers 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 debt management services company. 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 Maryland Debt Management Services Providers Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, debt management services providers 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
- Pay all funds received from consumers to the appropriate creditors
What Other Insurance Products Can Agents Offer Debt Management Services Providers in Maryland?
Maryland does not require debt management services providers 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 Debt Management Services Provider Customers?
The NMLS conveniently provides a public database to search for active debt management services providers 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.
