Rhode Island Small Loan Lender Bond: A Comprehensive Guide

August 20, 2021

This guide provides information for insurance agents to help their customers obtain Rhode Island Small Loan 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: 
  • $10,000 for lenders with 1 – 3 office locations
  • $20,000 for lenders with 4 – 7 office locations
  • $35,000 for lenders with 8 or more office locations
• Who Needs it: All small loan lenders operating in Rhode Island
• Purpose: To ensure the public will receive compensation for any damages should the small loan lender violate licensing law
• Who Regulates Small Loan Lenders In Rhode Island: The Rhode Island Department of Business Regulation

Background

Rhode Island statute 19-14-2 requires all small loan lenders operating in the state to obtain a license with the Department of Business and Regulation. The Rhode Island legislature enacted the licensing laws and regulations to ensure that small loan lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, small loan lenders must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Rhode Island Small Loan Lender Bond?

Rhode Island requires small loan 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 lender fails to comply with the regulations set forth in Rhode Island statute 19-14-6. Specifically, the bond protects the public in the event the 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 lender breaks licensing laws.

How Can an Insurance Agent Obtain a Rhode Island Small Loan Lender Surety Bond?

BondExchange makes obtaining a Rhode Island Small Loan Lender Bond easy. Simply login to your account and use our keyword search to find the “loan” 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 Rhode Island Small Loan Lender Bond?

Surety companies will run a credit check on the owners of the lending company to determine eligibility and pricing for the Rhode Island Small Loan 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 Rhode Island Small Loan Lender Bond Cost?

The Rhode Island Small Loan 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 a $10,000 bond requirement.

$10,000 Rhode Island Small Loan Lender Bond Cost

How Does Rhode Island Define “Small Loan Lender?”

Rhode Island statute 19-14-1 defines a small loan lender as any business entity who solely issues loans that are $5,000 or less and are not secured by any real estate.

How Do Small Loan Lenders Apply for a License in Rhode Island

Small loan lenders in Rhode Island 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 Rhode Island Small Loan Lender License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Small loan lenders must purchase and maintain a surety bond with the following limit:

• • $10,000 for lenders with 1 – 3 office locations
  • $20,000 for lenders with 4 – 7 office locations
  • $35,000 for lenders with 8 or more office locations

Step 2 – Meet the Net Worth Requirements

Applicants for the Rhode Island Small Loan Lender License must maintain a company net worth (assets – liabilities) of at least $25,000. Applicants must submit company financial statements verifying their net worth when submitting their license application.

Step 3 – Request a NMLS Account

The Rhode Island Small Loan Lender 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 Rhode Island Small Loan Lender License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Company financial statements indicating a net worth of at least $25,000
  • Certificate of good standing
  • Company formation documents
  • Financial statements for all legal entities that own the company (if applicable)

Small loan lenders must pay a $825 fee when submitting their license application.

How Do Rhode Island Small Loan Lenders Renew Their License?

Small loan lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Rhode Island Small Loan Lender License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Rhode Island Small Loan Lender License?

Rhode Island does not require small loan lenders to purchase any form of liability insurance  as a prerequisite to obtaining a business license. Small loan lenders must purchase and maintain a surety bond with the following limit:

• $10,000 for lenders with 1 – 3 office locations
• $20,000 for lenders with 4 – 7 office locations
• $35,000 for lenders with 8 or more office locations

How Do Rhode Island Small Loan Lenders File Their Bond?

Small loan 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 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 Rhode Island Small Loan Lenders Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, small loan lenders in Rhode Island must ensure that they 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 Small Loan Lenders in Rhode Island?

Rhode Island does not require small loan 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 other types of 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 Rhode Island Small Loan Lender Customers?

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