What is a Payday Loan Bond?
A payday loan bond is often required by most states to ensure that your company follows fair lending practices when issuing loans. They are intended to protect the borrowers from any misconduct on the part of the payday loan company. Your state may require you to purchase this bond before they issue your business license.
How does a payday loan bond work?
The payday loan bond works like any surety bond. There are three main entities: the obligee, the principal, and the surety.
- Obligee: the agency requiring the purchase of a payday loan bond. In this case, the state.
- Principal: the individual or business that must obtain the payday loan bond.
- Surety: the underwriter of the bond, providing the financial backing for the payday loan bond.
If you or any employee working with your payday loan company fails to meet the regulations and terms set in the payday loan bond, then a claim can be filed against the bond. If the investigation of the claim finds that it is valid, then the Surety Company will make a payment to the complainant, such as the state or the borrower. You will then need to repay the amount that is paid out from the bond. The maximum amount paid out of the claim will be no more than the total bond amount.
How much is a payday loan bond?
Your state will determine the minimum amount of bond coverage a payday loan company must obtain. Your premium will be a percentage of the bond amount. For example, if your bond is $10,000 then you can expect to pay anywhere from $100 and up for your payday loan bond, depending on qualifications. You can request your free quote and we will be able to help you get started on your bond paperwork right away.
How does a payday loan bond benefit my business?
Being a bonded company is a great way to give your customers confidence in doing business with you. They will feel that they are being protected and that if something goes wrong, they will be compensated.