Mississippi Credit Availability Act Bond: A Comprehensive Guide

July 7, 2021

This guide provides information for insurance agents to help their customers obtain Mississippi Credit Availability Act Bonds

At a Glance:

• Average Cost: Between $150 to $750 per year based on the applicant’s credit
• Bond Amount: $10,000
• Who Needs it: All payday lenders operating in Mississippi
• 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 Mississippi: The Mississippi Department of Banking and Consumer Finance

Background

Mississippi statute 75-607-65 requires all payday lenders operating in the state to obtain a license with the Department of Banking and Consumer Finance. The Mississippi 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 $10,000 surety bond to be eligible for licensure.

What is the Purpose of the Mississippi Credit Availability Act Bond?

Mississippi 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 the Mississippi Credit Availability Act. Specifically, the bond protects the public in the event the payday lender engages in any acts of fraud or breaches any contracts made with consumers. 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 Mississippi Credit Availability Act Bond?

BondExchange makes obtaining a Mississippi Credit Availability Act 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 Mississippi Credit Availability Act Bond?

Surety companies will run a credit check on the owners of the lending company to determine eligibility and pricing for the Mississippi Credit Availability Act 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 Mississippi Credit Availability Act Bond Bond Cost?

The Mississippi Credit Availability Act Bond can cost anywhere between $150 to $750 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 $10,000 bond requirement.

$10,000 Credit Availability Act Bond Cost

How Does Mississippi Define “Payday Lender?”

Mississippi statute 75-67-603 defines a payday lender as any individual or business entity who provides a consumer with a fully amortized loan, secured or unsecured, payable in substantially equal payments due monthly, or on any other schedule, over an overall term of four to twelve months, calculated on the amount initially disbursed to the account holder or holders, plus any fees.

How do Payday Lenders Apply For a License in Mississippi?

Payday lenders in Mississippi 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 Mississippi Credit Availability Act License expires on September 1 of each year and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirements

Applicants for the Mississippi Credit Availability Act License must have a company net worth (assets – liabilities) of at least $20,000, plus an additional $5,000 per business location (not including the principal place of business). Applicants must submit a company financial statement, signed by an executive officer, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Payday Lenders must purchase and maintain a $10,000 surety bond

Step 3 – Request an NMLS Account

The Mississippi Credit Availability Act 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 Mississippi Credit Availability Act License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Company financial statements
  • The following company contacts:
    • Primary
    • Primary consumer complaint
    • Licensing
    • Exam Delivery
    • Consumer Complaint (Regulator)
    • Legal
  • Certificate of Good Standing
  • Company formation documents
  • Detailed resumes for any individual who signs the license application

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

• • $750 license fee
  • $36.25 background check fee (per person)

How Do Mississippi Payday Lenders Renew Their License?

Payday lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Mississippi Credit Availability Act License expires on September 1 of each year and must be renewed before the expiration date.

What are the Insurance Requirements for the Mississippi Payday Lender License?

Mississippi does not require payday lenders to purchase any form of liability insurance as a prerequisite to obtaining a business license. Payday Lenders must purchase and maintain a $10,000 surety bond.

How Do Mississippi Payday Lenders File Their Bond?

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

• Name and principal address of entity/individual(s) buying the bond
• Surety company’s name and address
• Bond term
• Date the bond is signed

What Can Mississippi Payday Lenders Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, payday lenders in Mississippi 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 Payday Lenders in Mississippi?

Mississippi does not require payday lenders to purchase any form of liability insurance as a prerequisite to obtaining a business 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 Mississippi Payday Lender Customers?

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