Iowa Money Transmitter Bonds Explained
In order to start a money transmitting business in Iowa, you need to undergo a licensing procedure with state authorities, also known as obtaining a money services license. The process entails providing a money transmitter bond.
The bonding requirement works as a safety mechanism that protects the state and the general public. It ensures you will follow the law in your operations as a money transmitter in Iowa.
The surety bond functions as a contract between three entities, with your company being the principal who has to get bonded. The Iowa Division of Banking is the obligee to which you have to provide it, and the surety is the party that backs your business with the bonding.
Questions about Money Transmitter Bonds in Iowa
When do I need to get this bond?
The bonding requirement is an indispensable part of the Iowa money transmitter license procedure. The licensing body in the state is the Division of Banking, but the Nationwide Multistate Licensing System and Registry (NMLS) handles the administrative process.
You have to provide a bond in an amount between $50,000 and $300,000. It guarantees you will follow the Iowa Uniform Money Services Act and other applicable laws.
How much do I have to pay to get bonded?
The price that you have to pay to get bonded is based on the surety bond amount set by state authorities. The minimum requirement for Iowa money transmitters is $50,000, with an additional $10,000 for each extra location that you want to operate. The highest possible bond amount is $300,000.
The bond premium is the actual sum that you have to pay, and it represents a small percentage of the required bond amount. It is set on the basis of the strength of your personal and business finances. Your surety determines your surety bond cost by considering your personal credit score. It may also need to review your audited business financials, personal financial statements, and cash on hand. This is how the bonding risk is assessed, which then impacts your bond cost.
Is bad credit bonding possible?
Money transmitter bonds are usually required in comparatively high amounts. This makes them riskier to underwrite. Sureties would need to see a high level of financial stability before they would be able to provide you with this type of bonds. Thus, if your finances are not in the best of shapes, it may be difficult to get bonded. You will need to provide your company's audited finances, as well as any other paperwork that can contribute to the strength of your overall profile.
How do I get my bond?
You can launch your bonding process by completing our online application form (it takes 5min). You will have to provide extensive documentation, so that we can assess your quote. Once you receive it, you can purchase the bond online straight away. We will then send you a digital and a hard copy of your bond.
Keen on learning more about how bonding works? Don't miss the extensive guide on our How to Get Bonded page.
You can also consult our bonding experts with your queries by calling us at (877) 514-5146.
What is the procedure in case of a bond claim?
The surety bond that you provide as a money transmitter does not protect your business. It safeguards the interests of your customers against potential illegal activities you may commit. In such cases, they can file a claim against your bond to demand fair compensation.
On proven claims, the surety would step in to provide the reimbursement quickly. Then you will need to fully repay it, since the indemnity remains with you. It is best to avoid situations that can lead to claims, as they can lead to financial and reputational harm.