Vermont Debt Adjuster Bond: A Comprehensive Guide

September 1, 2021

This guide provides information for insurance agents to help their customers obtain Vermont Debt Adjuster Bonds

At a Glance:

• Average Cost: Between 1.5% to 5% of the bond amount per year based on the applicant’s credit
• Bond Amount: Minimum of $50,000 (more on this later)
• Who Needs it: All debt adjusters operating in Vermont
• Purpose: To ensure the public will receive compensation for any damages should the debt adjuster fail to comply with licensing law
• Who Regulates Debt Adjusters In Vermont: The Vermont Department of Financial Regulation

Background

Vermont general law 8 V.S.A. § 2752 requires all debt adjusters operating in the state to obtain a license with the Department of Financial Regulation. The Vermont legislature enacted the licensing laws and regulations to ensure that debt adjusters engage in ethical business practices. To provide financial security for the enforcement of the licensing law, debt adjusters must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Vermont Debt Adjuster Bond?

Vermont requires debt adjusters 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 adjuster fails to comply with the licensing regulations outlined in Vermont general law Title 8 Chapter 83. Specifically, the bond protects the public in the event the debt adjuster 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 debt adjuster breaks licensing laws.

How Can an Insurance Agent Obtain a Vermont Debt Adjuster Surety Bond?

BondExchange makes obtaining a Vermont Debt Adjuster 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?

The Vermont statute 2755 dictates that the limit on the Debt Adjuster Bond be a minimum of $50,000.00. The Department of Financial Regulation may increase the bond amount on a case by case basis if the debt adjuster has a history of valid consumer complaints made against them or if their business’s financial condition is inadequate.

Is a Credit Check Required for the Vermont Debt Adjuster Bond?

Surety companies will run a credit check on the owners of the debt adjustment company to determine eligibility and pricing for the Vermont Debt Adjuster 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 Vermont Debt Adjuster Bond Cost?

The Vermont Debt Adjuster Surety Bond can cost anywhere between 1.5% to 5% of the bond amount per year. Insurance companies determine the rate based on several 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 Debt Adjuster Bond Cost

*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 Vermont Define “Debt Adjuster?”

To paraphrase Vermont statute 2751, a debt adjuster is any business entity who distributes consumer funds to creditors of a consumer or who formulates a strategy for consumers to repay their debt obligations.

What Activities are Authorized Under the Vermont Debt Adjuster License?

The Vermont Debt Adjuster authorizes the following activities as defined by NMLS’s business activities definitions chart:

• Debt negotiation
• Debt settlement/debt adjustment
• Debt management/credit counseling
• Non-mortgage loan modifications
• Bi-weekly payment processing services

How do Adjusters Apply for a License in Vermont?

Debt adjusters in Vermont 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 Vermont Adjuster License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Debt Adjusters must purchase and maintain a surety bond with a minimum limit of $50,000

Step 2 – Hire a Qualifying Individual

Applicants for the Vermont Adjuster License must employ a qualified individual who is capable of managing the day-to-day operations of the business. The qualifying individual must be employed in a management position.

Step 3 – Request an NMLS Account

The Vermont Adjuster 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 Vermont Adjuster 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
    • Exam delivery
    • Pre-Exam contact
  • Companies Uniform Debt Management Services Act accreditation (if applicable)
  • Disclosure questions
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure
  • Certificate of Good Standing
  • The following document samples:
    • Gramm-Leach-Bliley Privacy Notice
    • Proposed contracts the company will use with Vermont consumers
  • Company formation documents
  • Company management and organizational charts
  • Trust account authorization

The following items must be submitted outside the NMLS and emailed to DFR.NMLS1@vermont.gov

• • Financial statements for all company owners with an ownership stake of 10% or more
  • Individual criminal background check requirements
  • Home state licensure (if headquartered in another state)
  • Federal tax returns for the preceding two years

Debt Adjusters must pay the following fees when submitting their license application:

• • $250 license fee
  • $250.00 application fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)

How Do Vermont Debt Adjusters Renew Their License?

Debt Adjusters can renew their licenses online through the NMLS. License holders need to simply login to their account to access their renewal application. The Vermont Adjuster License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Vermont Adjuster License?

Vermont does not require debt adjusters to obtain any form of liability insurance as a prerequisite to obtaining a business license. Debt adjusters must purchase and maintain a surety bond with a minimum limit of $50,000.

How Do Vermont Debt Adjusters File Their Bond?

Debt Adjusters 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 adjustment company. The surety company should include the following information on the bond form:

• Legal name and address of entity/individual(s) buying the bond
• Surety company’s name and state of incorporation
• Bond amount
• Date the bond is signed

What Can Vermont Debt Adjusters Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, debt adjusters in Vermont 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 Debt Adjusters in Vermont?

Vermont does not require debt adjusters 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 Vermont Debt Adjuster Customers?

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