What is a collection agency bond?
Collection agency bonds (also known as debt collector bonds) are legally binding agreements between three parties: collection agencies, the government agency responsible for regulating debt collector activity in the local jurisdiction, and a surety company.
The government agency is the Obligee and establishes the obligations that the debt collector (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the debt collector.
Why do you need a collection agency bond?
Collection agency bonds are required in most states before obtaining a license to operate as a debt collector. When the surety company issues the bond, they provide the government agency a guarantee that the customers of a licensed debt collector will receive payment for financial losses resulting from a violation of the statutes and regulations set forth by the collection agency license.
If the debt collector fails to meet the obligations set out by the government agency, the surety will pay out any damages up to the bond amount. The debt collector is liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
How much does a collection agency bond cost?
Collection agency surety bond costs vary depending on the total bond amount and the premium rate. The government agency sets the required bond amount and the surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
Premium rates for collection agency bonds tend to range between 0.75% and 5% of the total bond amount. During the application process, the surety company evaluates your credit score, financial statements, industry experience, and licensing history. Applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a collection agency bond. EZ Surety still offers competitive rates to individuals with low credit scores or other financial issues.
Below are the lowest premiums EZ Surety has issued for collection agency surety bonds in popular states.
- EZ Surety has issued collection agency bonds in the State of New Jersey for premiums as low as $100.
- EZ Surety has issued collection agency bonds in the State of Tennessee for premiums as low as $115.
- EZ Surety has issued collection agency bonds in the State of North Carolina for premiums as low as $100.