What Is a Tennessee Collection Agency License Bond?
If you want to start a collection agency in Tennessee, you have to get licensed with state authorities. You need to obtain a collection agency bond as a part of the licensing prerequisites.
The goal of your bond is to ensure you will follow all applicable rules and regulations. It protects your customers and the general public. If you fail to abide by the law, a claimant can seek reimbursement via a bond claim.
This surety bond works just like any other bond in that is is a contract between three parties. The principal is your collection agency that has to obtain the bond. The Department of Commerce and Insurance is the obligee which imposes the bond requirement. The third party is the surety, which is in fact the bond provider.
Questions about Collection Agency Bonds
Who is required to obtain a bond?
Any entity that wants to collect payments for its customers in Tennessee needs to get a state collection agency license from the Department of Commerce and Insurance. Together with your application, you have to submit a surety bond in the appropriate amount and in the correct form:
Service License Bond A - $15,000
Service License Bond B - $20,000
- Service License Bond C - $25,000
Your bond guarantees that you will comply with the Tennessee Collection Service Act. It needs to be renewed together with your license every year.
How much do you have to pay to get bonded?
The bond amount that Tennessee collection agencies have to post depends on the number of employees. It can be between $15,000 and $25,000.
Your bond premium is only a percentage of the amount that you are required to obtain. For collection agencies with stable finances, it is usually between 1%-5%.
|Surety bond name||Surety bond amount||Above 700||Between 650-699||Between 600-649||Below 599|
|TN collection service license bond for 1-4 employees||$15,000||$112.5-$225||$150-$375||$375-$750||$750-$1,500|
How exactly is your surety bond cost set? Factors such as your personal credit score, business finances, and assets and liquidity are among the most important ones. By examining them, your surety provider can assess how risky it is to get you bonded. If your overall profile is solid, you can expect to pay a lower bond premium.
Can I get bonded with bad credit?
You can get the bond you need with Lance Surety Bonds even if you struggle with a low credit score, tax liens, bankruptcies, and civil judgements. Our Bad Credit Surety Bonds program is designed for you.
The bond rates are typically between 5% and 10% to compensate for the higher risk. As we have close relations with a number of A-rated, T-listed surety companies, we can find the right bond option that matches your situation.
How do I get a Tennessee collection service license bond?
Do you want to learn more about the bonding process? You can consult our How to Get Bonded page to get more details.
Our bonding specialists are happy to help. If you have questions or need help with your application, don’t hesitate to call us at (877) 514-5146.
What happens if I get a bond claim?
The purpose of your bond is to protect the general public rather than your business. This means that if you do not abide by the rules set in the state Collection Services Act, you can get a claim against your bond. This includes, most notably, if you fail to account to your clients all collected sums within one month after the end of each calendar month.
In such cases, a harmed party can file a claim to seek a compensation. Your surety may cover the costs at first, but you need to repay it fully afterwards. As this suggests, bond claims are a serious financial and reputational threat to your business, so it is best to avoid them.