California Prorater Bond

For businesses that manage debt on behalf of debtors in the state of California, obtaining a California prorater bond is an important part of meeting and remaining compliant with state law. However, for both established prorators and newcomers to the industry,  new changes in the law mean that the bond amount has risen significantly, and you will need to both apply for and receive a new bond to continue working. 

These changes reflect an increased focus on enhancing consumer protection by ensuring that businesses involved in debt management are better equipped to handle financial liabilities. But what does this mean for businesses and prorators themselves, and how can you calculate the costs and obtain a new bond without disrupting your business?

This article will answer those questions and provide you with our expert advice on who needs to apply for a bond and how.  Read on to learn more and benefit from our experience in providing prorator bonds for individuals and businesses across the US.

Previously, proraters in California needed a $25,000 surety bond, but this has now been raised to $100,000. However, as with any bond, the costs involved are determined by the surety bond provider based on the following factors:
 

• Credit Score — A business or individual’s credit rating plays a significant role in determining the premium for the bond. Higher credit scores result in lower premiums.
• Financial History — Providers may consider other aspects of financial health, such as outstanding debts or bankruptcies.
• Industry Experience — Those with a history of successful operation in the prorating or debt management industry may be seen as lower risk, reducing the bond premium.

For example, in general, premiums for surety bonds range from 1% to 10% of the bond amount. With the bond now set at $100,000, we can calculate a range for the annual premium:
 

• High Credit Score
  A company with a strong credit score could pay as little as 1% of the bond amount equivalent to a $1,000 premium per year for their bond.
• Low Credit Score
  A business with poor credit might face a premium as high as $10,000 per year, or 10% of the bond amount.  

Having said this, we are here to offer our expertise for companies and individuals with poor credit scores, and regardless of your financial profile we have enabled countless companies to secure low bond premiums.

While an increase in the bond amount demanded by the DFPI and the Check Sellers, Bill Payers and Proraters Law means you will need to reassess your paperwork, Lance Surety is on hand to help you through the application process. Explore the steps below and contact us to discuss how we can provide you with the advice you need to successfully obtain a California Prorator Bond. 

1. Submit Your Bond Application 

The first step in obtaining a prorater bond is to submit your bond application. This application requires you to provide essential information about your business, financial stability, and operations. You will need:
 

• Company Details — Legal business name, address, and contact information.

• Business Operations — A description of the services you provide, project scope, timelines, and budget details.

• Financial Records — Recent financial statements, credit reports, and any other documentation relevant to your financial standing.

2. Receive Your Quote 

Once your application is submitted, we will assess the risk involved in issuing the bond. This means analyzing your financial background, credit history, and business operations. Based on this evaluation, you will receive a personalized quote.

3. Complete Your Bond Purchase 

The final step is purchasing the prorater bond. After reviewing and agreeing to the terms, you’ll need to pay the bond premium to finalize the process. Key steps include:
 

• indemnity Agreement — Signing the contract with the bond provider.

• Premium Payment — Paying the bond premium as specified in the quote.

• Bond Issuance — Once payment is made, you’ll receive the official bond document, which you can then file with the appropriate regulatory authority as part of your legal requirements.

California prorater bonds are required for businesses that handle debt management or bill payment services on behalf of consumers. These businesses, known as proraters or prorating agencies, act as intermediaries between debtors and creditors, collecting and distributing funds as part of debt repayment plans.

The California Department of Financial Protection and Innovation (DFPI) requires all debt proraters operating in the state to hold a valid prorater bond. This bond serves as a form of financial protection for consumers, ensuring that proraters comply with state regulations and ethical standards when managing clients’ money.

Additionally, this bond is required under California Financial Code Section 12200. According to this law, businesses that assist consumers in managing debt repayment must secure a surety bond to cover any financial damages that may arise from fraudulent or unethical behavior.

Businesses that need this bond include:
 

• Debt Settlement Companies — These companies negotiate with creditors on behalf of consumers to settle debts for less than the amount owed.
• Bill Payment Services — Agencies that handle recurring payments, such as utility bills or rent, on behalf of consumers.
• Debt Management Agencies — Companies that create debt management plans to help consumers repay their debts over time.

Failure to obtain a prorater bond can result in significant penalties, including fines or the suspension of business operations. Therefore, it’s crucial for any business involved in these services to secure the bond as required by law.

For more detailed information about the bond requirements, contact Lance Surety today for a free quote.