Tennessee Industrial Loan and Thrift Bond: A Comprehensive Guide

August 26, 2021

This guide provides information for insurance agents to help their customers obtain Tennessee Industrial Loan and Thrifter 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: 
  • $200,000 for lenders who make residential mortgage loans
  • $50,000 for all other lenders
• Who Needs it: All Tennessee companies issuing loans and charging interest authorized under the Industrial Loan and Thrift Companies Act 
• Purpose: To ensure the public will receive compensation for any damages should the lender violate registration law
• Who Regulates Industrial Loan and Thrift Lenders In Tennessee: The Tennessee Department of Financial Institutions

Background

Tennessee statute 45-5-103 requires all industrial loan and thrift lenders operating in the state to register with the Department of Financial Institutions. The Tennessee legislature enacted the registration laws and regulations to ensure that industrial loan and thrift lenders engage in ethical business practices. In order to provide financial security for the enforcement of the registration law, industrial loan and thrift lenders must purchase and maintain a surety bond to be eligible for registration.

What is the Purpose of the Tennessee Industrial Loan and Thrift Bond?

Tennessee requires industrial loan and thrift companies to purchase a surety bond as part of the application process to obtain a business registration. The bond ensures that the public will receive compensation for financial harm if the lender fails to comply with the regulations set forth in the Tennessee Industrial Loan and Thrift Companies Act . 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 registration laws.

How Can an Insurance Agent Obtain a Tennessee Industrial Loan and Thrift Surety Bond?

BondExchange makes obtaining a Tennessee Flexible Credit Lender 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 Tennessee Industrial Loan and Thrift Bond?

Surety companies will run a credit check on the owners of the lending company to determine eligibility and pricing for the Tennessee Industrial Loan and Thrift 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 Tennessee Industrial Loan and Thrift Bond Cost?

The Tennessee Industrial Loan and Thrift 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 $50,000 bond requirement.

$50,000 Industrial Loan and Thrift Bond Cost

Who Needs to Obtain a Registration?

Tennessee statute 45-5-103 requires all lending companies who make loans authorized under the Industrial Loan and Thrift Companies Act to obtain a business registration. This also includes endorsement companies.

How Do Industrial Loan and Thrift Companies Apply for a License in Tennessee?

Industrial loan and thrift companies in Tennessee 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.

Registration Period – The Tennessee Industrial Loan and Thrift Registration 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 Tennessee Industrial Loan and Thrift Registration must have a company net worth (assets – liabilities) of at least $25,000 per office location. Applicants must submit a financial statement verifying their net worth when submitting their registration application.

Step 2 – Purchase a Surety Bond

Industrial Loan and Thrifters must purchase and maintain a surety bond with the following limit:

• • $200,000 for lenders who make residential mortgage loans
  • $50,000 for all other lenders

Step 3 – Request a NMLS Account

The Tennessee Industrial Loan and Thrift Registration application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a registration application, applicants must first request to obtain an NMLS account.

Step 5 – Complete the Application

All Tennessee Industrial Loan and Thrift Registration 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 per office location
  • Primary company and consumer complaint contacts
  • Disclosure Questions
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure
  • Certificate of Good Standing
  • Company formation documents
  • Company management and organizational forms
  • Detailed resumes for each control person

Industrial loan and thrift lenders must pay the following fees when submitting their registration application:

• • $600 registration fee
  • $36.25 background check fee (per person)

How Do Tennessee Industrial Loan and Thrift Companies Renew Their Registration?

Industrial loan and thrift companies can renew their registration online through the NMLS. Registration holders need to simply login to their account to access their renewal application. The Tennessee Industrial Loan and Thrift Registration expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Tennessee Industrial Loan and Thrift Registration?

Tennessee does not require industrial loan and thrift companies to purchase any form of liability insurance as a prerequisite to obtaining a business registration. Industrial Loan and Thrift Companies must purchase and maintain a surety bond with the following limit:

• $200,000 for lenders who make residential mortgage loans
• $50,000 for all other lenders

How Do Tennessee Industrial Loan and Thrift Companies File Their Bonds?

Tennessee industrial loan and thrift companies 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 location of entity/individual(s) buying the bond
• Surety company’s state of incorporation
• Bond amount
• Date the bond is signed
• Date the bond goes into effect

What Can Tennessee Industrial Loan and Thrift Companies Do to Avoid Claims Against Their Bonds?

To avoid claims on their bond, Industrial Loan and Thrift Companies in Tennessee must follow all registration 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
• Pay all money owed to consumers

What Other Insurance Products Can Agents Offer Industrial Loan and Thrift Companies in Tennessee?

Tennessee does not require industrial loan and thrift companies to purchase any form of liability insurance as a prerequisite to obtaining a business registration. 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 Tennessee Industrial Loan and Thrift Company Customers?

Tennessee conveniently provides a public database to search for active industrial loan and thrift companies in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.