North Dakota Money Broker Bond: A Comprehensive Guide

July 19, 2021

This guide provides information for insurance agents to help their customers obtain North Dakota Money Broker Bonds

At a Glance:

• Average Cost: Between $500 to $6,250 per year based on the applicant’s credit
• Bond Amount: $50,000
• Who Needs it: All money brokers operating in North Dakota
• Purpose: To ensure the public will receive compensation for any damages should the money broker engage in any acts of fraud
• Who Regulates Money Brokers in North Dakota: The North Dakota Department of Financial Institutions

Background

North Dakota statute 13-04.102 requires all money brokers operating in the state to obtain a license with the Department of Financial Institutions. The North Dakota legislature enacted the licensing laws and regulations to ensure that money brokers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, money brokers must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the North Dakota Money Broker Bond?

North Dakota requires money brokers 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 money broker fails to comply with the regulations set forth in the North Dakota Statute Chapter 13-04.1. Specifically, the bond protects the public in the event the money broker 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 money broker breaks licensing laws.

How Can an Insurance Agent Obtain a North Dakota Money Broker Bond?

BondExchange makes obtaining a North Dakota Money Broker Bond easy. Simply login to your account and use our keyword search to find the “money” 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 North Dakota Money Broker Bond?

Surety companies will run a credit check on the owners of the money brokerage firm to determine eligibility and pricing for the North Dakota Money Broker 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 North Dakota Money Broker Bond Cost?

The North Dakota Money Broker Bond can cost anywhere between $500 to $6,250 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 $50,000 bond requirement.

$50,000 Money Broker Bond Cost

How Does North Dakota Define “Money Broker?”

North Dakota statute 13-04.1-01.1 defines a money broker as any business entity who provides loans/leases as a form of financing or who advertises their capability of doing so.

How do Money Brokers Apply For a License in North Dakota?

Money Brokers in North Dakota 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 North Dakota Money Broker 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 North Dakota Money Broker License must have a company net worth (assets – liabilities) of at least $25,000. Applicants must submit a financial statement verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Money brokers must purchase and maintain a $50,000 surety bond

Step 3 – Hire a Qualifying Individual

License applicants must employ a qualifying individual who is capable of handling the day to day operations of the money brokering business. It is recommended that the qualifying individual be placed in a managerial role and have a minimum of three years industry experience.

Step 4 – Request a NMLS Account

The North Dakota Money Broker 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 5 – Complete the Application

All North Dakota Money Broker License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Audited financial statements indicating a company net worth of at least $25,000
  • The following company contacts:
    • Primary
    • Primary consumer complaint
    • Legal
    • Pre-Exam Contact
    • Exam Delivery/Billing
    • Licensing
  • Bank account information for the company’s letter/line of credit, operating, and/or trust primary account(s)
  • Disclosure questions
  • Company’s AML/BSA Policy
  • Companies IT/Cybersecurity policy
  • Company business plan containing the following information:
    • Executive Summary (Overview)
    • Marketing strategies/Target markets
    • Products/Services
    • Management/Organization Structure
    • Sources of income generation
  • Certificate of Good Standing
  • Sample privacy notice provided to consumers
  • Company formation documents
  • Management chart detailing the company’s hierarchy
  • Organization chart detailing the company’s ownership structure
  • Verification of the company’s warehouse line of credit
  • Personal financial statements of all company owner’s with at least a 25% stake

Money brokers must pay the following fees when submitting their license application

• • $450 license fee
  • $400 application fee
  • $100 NMLS processing fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)

How Do North Dakota Money Brokers Renew Their License?

Money brokers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The North Dakota Money Broker License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the North Dakota Money Broker License?

North Dakota does not require money brokers to purchase any form of liability insurance as a prerequisite to obtaining a business license. Money brokers must purchase and maintain a $50,000 surety bond.

How Do North Dakota Money Brokers File Their Bond?

Money brokers 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 money brokerage firm. The surety company should include the following information on the bond form:

• Name of entity/individual(s) buying the bond
• Surety company’s name and state of incorporation
• Bond amount
• Date the bond goes into effect

What Can North Dakota Money Brokers Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, money brokers in North Dakota must follow all license regulations in the state, including some of the most important issues below that tend to cause claim

• Do not engage in any acts of fraud
• Do not breach any contracts made with consumers
• Do not charge unnecessary fees

What Other Insurance Products Can Agents Offer Money Brokers in North Dakota?

North Dakota does not require money brokers 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 North Dakota Money Broker Customers?

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