What Is a Minnesota Collection Agency Bond?
If you’d like to operate as a collection agency in Minnesota, you need to register with the state Commerce Department. You can run your business as a corporation/LLC, as an individual proprietorship, or as a partnership. For all registration types, you need to post a collection agency bond to meet the state requirements.
This Minnesota surety bond guarantees that you will comply with all applicable laws in your work as a collection agent. It protects the general public and the state from illegal actions you may engage in. if a party suffers losses as a result, they can make a claim on the bond and thus receive a financial compensation.
How does your bond work? It is a contract between three entities. The principal is your collection agency, which has to post a bond. The Minnesota Commerce Department is the obligee to which you have to present the bond. The bond is provided by the surety.
Frequently Asked Questions
Who has to get a collection agency bond?
Any person or entity looking to start collection agency activities in Minnesota needs to register with the Commerce Department. In order to obtain a Minnesota collection agency license, you need to post a $50,000 bond. The requirement applies to all types of registration. The bond forms are the following:
- Partnership collection agency bond form
Collection agencies have to post additionally $5,000 for every sum of $100,000 collected from debtors in the state in the last calendar year (without the commissions it has made on the collections). The maximum combined bond amount is $100,000.
The bonds guarantee you will adhere to the rules set in Chapter 332 of the 2017 Minnesota Statutes.
What are the bond costs?
Collection agencies in Minnesota have to post a $50,000 bond in the general case. You may also need to post a bond amount of $5,000 for each collected $100,000, which is added to the general bond requirement.
This is called the bond amount, which is different from the actual bond premium. The price you have to pay to get bonded is only a fraction of the amount. For collection agency bonds, the typical rates are about 1%-5% for applicants with good finances.
|Surety bond name||Surety bond amount||Above 700||Between 650-699||Between 600-649||Below 599|
|Minnesota collection agency bond (general case)||$50,000||$375-$750||$500-$1,250||$1,250-$2,500||$2,500-$5,000|
The bond premium is calculated after considering your personal credit score, business finances, and assets and liquidity. The surety bond cost thus depends on the level of bonding risk that the surety assesses on the basis of these factors. If you can demonstrate financial and business strength, your bond price will be lower.
Can I get bonded with bad credit?
With Lance Surety Bonds, you can get you bonded even if you have low credit scores, tax liens, bankruptcies, or civil judgements. Our Bad Credit Surety Bonds program is designed for applicants with problematic finances.
The bad credit bonding rates are usually between 5% to 10%. The increased price compensates for the higher bonding risk. We collaborate with a number of A-rated, T-listed surety companies, which means we can shop around for the best bonding option for you.
How do I obtain a collection agency bond?
If you’d like to learn more about how bonding works, you can consult our How to Get Bonded page for thorough details. You can reach us at (877) 514-5146 if you need help with your application or have any questions.
What happens if I get a bond claim?
You may receive a claim on your bond if you fail to follow your legal obligations. A harmed party can seek a compensation up to the penal sum of your bond. First, the claim is examined and should be proven, so that an actual reimbursement is paid.
The surety that has backed your business may take up the costs at first. In this way, it ensures the claimant receives a fair and quick compensation. You are fully responsible for these costs, however. This means the bond does not protect your company, but rather the general public. Bond claims are to be avoided, as they can harm your business.