California Money Transmitter Bonds Explained
The California Department of Business Oversight requires that all money transmitter who wish to make transactions within the state to obtain a money transmitter license. An important step of the licensing process is getting a money transmitter bond.
Money transmitter bonds act much like other types of surety bonds; they provide protection to the state and the clients of the bonded business in case that business violates the law. The bond can provide quick recourse to anyone who has suffered losses due to the actions of a money transmitter.
To stay out of claims, money transmitters in California are required to run their business in accordance with Division 1.2 of the California Financial Code.
Want to learn more about this bond? Continue reading the Questions sections below. For any questions, don’t hesitate to call us at (877)-514-5146.
Frequently Asked Questions
How much does a money transmitter bond cost in California?
This type of bond is considered high-risk, so a number of factors come into play when determining your cost. However, like other surety bonds, the applicant’s credit score is very important.
Applications with a score above 700 may pay somewhere between 1% and 5%, but those with a lower score can be quoted at 10% or more. To calculate your premium, you need to know your credit score and the required amount for your business. Unlike other bonds, the amount for this bond isn’t fixed, but can vary between $250,000 and $7,000,000.
The total amount must be greater than the average daily obligations for funds received for transmission in California, but it cannot exceed $7 million. To find out your exact bond amount, you should contact the Department of Business oversight prior to applying.
In addition to your credit report, the surety will most certainly look into your financial statements before giving you a quote.
Find out more about the factors that determine your premium on our “What Does a Surety Bond Cost?” page.
Can I get this bond if my credit score is low?
Yes, you will still be able to get bonded despite having bad credit. However, your premium can climb up to around 10% a year, because these bonds are considered high-risk.
Our surety bond agents will work closely with you and help you build an application that highlights your strengths. For example, if your credit score is low but you have solid finances, which are reflected in your personal and business financial statements, of if you have liquid assets such as cash on hand, you should submit that information as part of your application. This can indicate to the surety that you’re capable of making good on your claims, and therefore pose less of a risk than a typical bad-credit applicant.
If you want to learn more about getting bonded with bad credit, check out our Q&A on bad credit surety bonds.
How do I apply for this bond?
Our online application is fast and easy to submit. Afterwards, we’ll get in touch and ask you to provide financial statements and ownership information before we can give you a bond quote.
Our agents work closely with you, to ensure your questions are answered and you have the best bond for your needs. Your bond should be ready within two business days after submitting all necessary documentation and paying your premium.
Your money transmitter bond must be renewed annually to remain valid. Choose Lance Surety Bonds and you can rest assured you will never miss your renewal: we’ll send you some helpful reminders long before the expiration date.
How are claims handled for money transmitter bonds in California?
It’s important that you run your business in compliance with all relevant provisions outlined in Division 1.2 of the California Financial Code (commencing with Section 2000).
You’re required to refund clients within 10 days of receiving a request, cooperate with the authorities during examinations, and promptly suspend an agent who has been implicated in fraud or other violations. These are just some of the provisions of the law. Be sure that you and all of your agents are aware of their implications.
If you fail to comply with all the provision of the California Money Transmitter Act, you may face a claim, which can go as high as the total bond amount, depending on the gravity of the offense. It’s best for your business to stay out of claims as they can be time-consuming and costly, and harm your reputation.
In case of a claim, the surety will cover the costs so that the claimant can obtain quick compensation. However, it is up to you to reimburse the surety for all costs incurred.