Money Transmitter Bonds in Maryland Explained
Launching a Maryland money transmitter business entails getting a state license. As part of the licensing process, you are required to obtain a money transmitter bond.
This criterion is set in order to ensure an extra layer of protection for the state and its citizens. It can serve as a safety mechanism in case you transgress from your legal obligations as a money transmitter.
The bonding represents a contractual agreement between your business as the principal and two more parties. The Maryland Department of Labor, Licensing and Regulation is the obligee that requires the bond. The surety is the provider of the bond that backs your company.
Questions about Money Transmitter Bonds in Maryland
Who is required to obtain a money transmitter bond in Maryland?
In case you want to get a Maryland money transmitter license, so that you can operate legally in the state, you need a surety bond. The Nationwide Multistate Licensing System and Registry (NMLS) handles the practical licensing, while the Maryland Department of Labor, Licensing and Regulation is the state licensing authority. The bond amount that you will have to post is between $150,000 and $1 million and is set on a case-by-case basis. Its purpose is to ensure you will comply with the Maryland Code.
How much does it cost to get a money transmitter bond in Maryland?
Maryland money transmitters are required to post a bond between $150,000 and $1 million. The exact amount is set on the basis of the actual or projected average monthly outstanding payment instruments or liability for the previous 12 months.
However, the surety bond cost that you have to pay is a small fraction of this bond amount, called the bond premium. It is typically between 1% and 5% for applicants with solid finances.
In order to determine your bond price, the surety that you apply with has to examine carefully your personal and business finances. It has to consider your personal credit score as a main factor, and for larger bond amounts, it will need to review your audited business financials. You may also have to showcase personal financial statement or provide cash verification for further assessment. The stronger these criteria are, the better your bond price will be.
Can I get bonded with bad credit?
It is more difficult to get bonded with problematic finances, and for money transmitter bonds, this may be a real hurdle due to the large bonding amounts. Surety underwriters are less willing to provide such bonds for applicants with unstable finances. Thus, your best chances are to showcase the maximum strength of your financial stats. Audited business financials will be surely required.
What is the application process like?
Would you like to explore the nitty-gritty details of how bonding works? Make sure to refer to our How to Get Bonded page, which contains a thorough overview.
Lance Surety Bonds specialists are here to answer your questions and help with your application. Just call us at (877) 514-5146.
What if I get a bond claim?
As the surety bond doesn’t function like insurance for your business, you may end up with a claim against the bond if you transgress from your obligations under Maryland law. Your surety needs to examine the case. If proven, you are liable to cover the claimant’s reimbursement.
The maximum penal sum is up to the bond amount you have posted. At first, your surety may ensure a fast compensation by paying the claimant. However, you need to repay it shortly after. That’s why it’s best to stay away from situations that can give rise to claims.