What Is a Michigan Money Transmitter Bond?
A major prerequisite for obtaining your Michigan money transmitter license is posting a money transmitter bond.
Why do you have to get bonded? Your surety bond functions as a safety net for the state and your customers. It ensures you will follow the law in your operations as a money transmitter.
In essence, the bond is a contract between three entities. The principal is your money transmitting business. The Michigan Department of Insurance and Financial Services is the obligee that requires the bond. The bond provider is the surety.
Questions about Money Transmitter Bonds in Michigan
When am I required to post this bond?
Any entity that wants to operate as a money transmitter in Michigan needs a license from the state Department of Insurance and Financial Services. The licensing process is conducted via the Nationwide Multistate Licensing System (NMLS). The bond amount is between $500,000 and $1,500,000 and is based on the number of your locations and of authorized delegates. The bond ensures your compliance with the Michigan Money Transmission Services Act.
How much does the Michigan money transmitter bond cost?
In order to get your Michigan money transmitter license, you are required to post a surety bond between $500,000 and $1.5 million.
The bond amount is different from the bond premium that you have to pay. It is typically between 1% and 5% of the amount if your finances are in good shape.
How is surety bond cost set? It is formulated on the basis of factors like your personal credit score, as well as business finances. The surety you apply with needs to assess the level of bonding risk. The lower it is, the smaller your bond price will be.
For bonds in large amounts such as the Michigan money transmitter bond, a review of your audited business financials is usually required. Other necessary paperwork that your surety may consider include your personal financial statement and cash verification. The type of currency you are working with may also be of importance in the bond cost formulation.
What happens if I have a bad credit?
Obtaining a large bond amount such as that of Michigan transmitter bonds is difficult if your finances are problematic. It may still be possible to get the bond you need if you can showcase a satisfactory level of financial stability. It is necessary to provide a review of your audited business financials. The more stable finances you can demonstrate, the more likely it is that the bonding decision will be positive.
How do I apply for this money transmitter bond?
Would you like to delve deeper into the details of how bonding works? Don’t miss our extensive How to Get Bonded page.
In case you have questions or need help with your application, we are here to assist you. Just call us at (877) 514-5146 to speak to one of our bonding specialists.
What if I get a claim against my surety bond?
The goal of your transmitter bond is to protect the interests of your customers and the state. If you do not abide by applicable laws and rules in Michigan, you may end up with a claim against your bond.
The bond is a safety mechanism that can provide a financial compensation to harmed parties. Claimants can seek a reimbursement up to the penal sum of your bond, which is between $500,000 and $1.5 million. As the amounts are considerable, it is best to stay away from situations that can lead to claims, as you are ultimately responsible for covering the payments on proven claims.