What Is a New Jersey Money Transmitter Bond?
If you want to start your own New Jersey money transmitter business, you have to get licensed with the state Department of Banking and Insurance. Providing a money transmitter bond is one of the criteria you need to meet as a part of the process.
How does the bond work? It’s a safety mechanism required by state authorities in order to protect the interests of the general public. If your customers suffer damages as a result of any illegal or unethical actions you’ve committed, the bond can provide a fair reimbursement.
Similarly to other types of surety bonds, the money transmitter bond represents a contract between three entities. Your money transmitting company is the principal. The NJ Department requiring the bond is the obligee. The third party is the surety, which backs your business by issuing the bond.
Questions about Money Transmitter Bonds in New Jersey
When is a New Jersey money transmitter bond needed?
You need a New Jersey money transmitter license from the Department of Banking and Insurance if you want to practice this profession in the state. As a part of the licensing, you need to provide a surety bond in an amount between $100,000 and $1,000,000. This is the official bond form. However, you have to pass the licensing steps through the Nationwide Multistate Licensing System and Registry (NMLS).
The goal of your bond is to guarantee that you will follow all applicable rules and regulations, including the New Jersey Money Transmitters Act.
What is the surety bond cost?
The bond amount you have to provide to obtain your New Jersey money transmitter license is between $100,000 and $1,000,000, as set by the licensing authorities. The bond premium you need to pay is a few percents of this required amount. It depends on your personal and business finances. If they are in good shape, the bond price can be as low as 1% and 5%.
A number of factors influence your exact surety bond cost. The surety that you apply with needs to take a close look at your personal credit score as the owner of the business. It’s very likely it will need to consider your audited business financials, since the bond amount is substantial. Your personal financial statement may also be needed, as well as a cash verification in some cases. The type of currency you’re handling as a money transmitter may also influence the bond cost. In general, the more stable your overall profile is, the smaller the bond premium is likely to be.
What happens if my credit is not perfect?
It is more difficult to obtain a money transmitter bond with problematic finances. In some cases, it may still be possible. You will, however, need to present your audited business financials as the main basis for the bonding decision. Your business and personal finances will have to be solid enough, so that a surety underwriter would be willing to extend surety credit of as much as $1,000,000 for your company.
How do I apply for a bond?
Would you like to learn the nitty-gritty details of how bonding works? Don’t miss out on our How to Get Bonded page. It provides in-depth information about the process.
Do you want to consult our bonding experts for your questions or bond application? Just call us at (877) 514-5146.
How are money transmitter bond claims managed?
Your surety bond functions as a safety net for the state and your customers. It does not protect your business. That’s why if you fail to follow the law in your operations as a money transmitter, you can end up with a claim against the bond.
Parties that have suffered damages due to your fraudulent or unethical actions can seek a compensation up to the penal sum of your bond, which is a considerable amount. If the case is proven, the surety has to ensure a fast reimbursement by taking up the costs at first. However, you are liable for all claim payments. Thus, it’s best to avoid situations that can lead to claims, as they are potentially quite harmful for your company.