Vermont Loan Solicitation Bond: A Comprehensive Guide

September 2, 2021

This guide provides information for insurance agents to help their customers obtain Vermont Loan Solicitation Bonds

At a Glance:

• Average Cost: Between 0.75% to 5% of the bond amount per year based on the applicant’s credit
• Bond Amount: $25,000
• Who Needs it: All loan solicitors operating in Vermont
• Purpose: To ensure the public will receive compensation for any damages should the loan solicitor fail to comply with licensing law
• Who Regulates Loan Solicitors In Vermont: The Vermont Department of Financial Regulation

Background

Vermont general law 8 V.S.A. § 2201 requires all loan solicitors 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 loan solicitors engage in ethical business practices. To provide financial security for the enforcement of the licensing law, loan solicitors must purchase and maintain a $25,000 surety bond to be eligible for licensure.

What is the Purpose of the Vermont Loan Solicitation Bond?

Vermont requires loan solicitors 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 loan solicitor fails to comply with the licensing regulations outlined in Vermont general law Title 8 Chapter 73. Specifically, the bond protects the public in the event the loan solicitor 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 loan solicitor breaks licensing laws.

How Can an Insurance Agent Obtain a Vermont Loan Solicitation Surety Bond?

BondExchange makes obtaining a Vermont Loan Solicitation 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.

How is the Bond Amount Determined?

Vermont general law 8 V.S.A. § 2203 C asserts that the limit on the Loan Solicitor Bond is $25,000. The statute also grants the Department of Financial Regulation the authority to increase the bond amount on a case-by-case basis. The commissioner will examine the total amount of loans originated by the solicitor when determining whether to increase the bond amount.

Is a Credit Check Required for the Vermont Loan Solicitation Bond?

Surety companies will run a credit check on the owners of the loan solicitation company to determine eligibility and pricing for the Vermont Loan Solicitation 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 Loan Solicitation Bond Cost?

The Vermont Loan Solicitation Surety Bond can cost anywhere between 0.75% 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 $25,000 bond requirement.

$25,000 Loan Solicitor 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 “Loan Solicitor?”

Vermont statute 2200 defines a loan solicitor as any business entity who provides one or more of the following services:

• Offers, solicits, brokers, arranges, places, or finds a loan for a prospective Vermont borrower
• Assists prospective Vermont borrowers in obtaining loans, including lead generation
• Arranges a loan through a third party by any method

Exemptions to this definition include:

• Residential mortgage loans
• Broker-dealers exempt from registration under Vermont statute 5402
• Licensed insurance producers
• Businesses who assist in financing the sales of consumer goods

How do Loan Solicitors Apply for a License in Vermont?

Loan solicitors 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 Loan Solicitor License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Loan Solicitors must purchase and maintain a $25,000 surety bond

Step 2 – Hire a Qualifying Individual

Applicants for the Vermont Solicitor License must employ a qualified individual who is capable of managing the day-to-day operations of the loan solicitation business. The qualifying individual must be employed in a management position at the applicant’s main corporate office.

Step 3 – Request an NMLS Account

The Vermont Loan Solicitor 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 Solicitor 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
  • Disclosure questions
  • Company business plan containing the following information:
    • Marketing strategies
    • Products & services
    • Target markets
    • Fee schedule
    • Operating structure
  • Certificate of Good Standing
  • Company’s financial privacy policy
  • Copy of the company’s Gramm-Leach-Bliley privacy notice
  • Company formation documents
  • Company management and organizational charts

The following items must be emailed to DFR.NMLS1@vermont.gov

• • Individual credit report requirements
  • Financial statements for all company owners with an ownership stake of 10% or more
  • Individual criminal background check requirements
  • Home state licensure

Loan Solicitors must pay the following fees when submitting their license application:

• • $500 license fee
  • $500 application fee
  • $100 NMLS processing fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)

How Do Vermont Loan Solicitors Renew Their License?

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

What Are the Insurance Requirements for the Vermont Solicitor License?

Vermont does not require loan solicitors to obtain any form of liability insurance as a prerequisite to obtaining a business license. Loan solicitors must purchase and maintain a $25,000 surety bond

How Do Vermont Loan Solicitors File Their Bond?

Loan solicitors 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 loan solicitation company. The surety company should include the following information on the bond form:

• Legal name and NMLS number of entity/individual(s) buying the bond
• Surety company’s name and NAIC number
• Bond amount
• Date the bond is signed

What Can Vermont Loan Solicitors Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, loan solicitors 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 Loan Solicitors in Vermont?

Vermont does not require loan solicitors 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 Loan Solicitor Customers?

The NMLS conveniently provides a public database to search for active loan solicitors 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.