Connecticut Money Transmitter Bonds
Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Connecticut money transmitter bond needs.
What Are They?
Connecticut money transmitter bonds are a type of license and permit surety bond. The bond is a money transmitter’s pledge to do business in accordance with all applicable Connecticut laws and regulations.
A Connecticut money transmitter bond protects consumers against financial loss due to the unlawful or unethical actions of a licensed money transmitter. It also protects the state against liability for having issued a license to a money transmitter who violates the terms of the surety bond agreement and causes financial harm to consumers.
Who Needs Them?
The Connecticut Banking Commissioner requires every person seeking a new license as a money transmitter or renewing an existing license to purchase a Connecticut money transmitter bond. The bond must have the same one-year term as the money transmitter license and must remain in force at all times to prevent revocation of the license.
The Banking Commissioner (the “obligee” named in the surety bond agreement) establishes the required bond amount (the bond’s “penal sum”) on a case-by-case basis. This amount will depend on the average weekly amount of money transmitted during the previous 12 months running from June 30 to June 30. The minimum penal sum is $300,000, and the maximum is $1 million.
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How Do They Work?
The surety bond agreement for a Connecticut money transmitter bond obligates the money transmitter (the bond’s “principal”) to do business in compliance with the state’s Money Transmission Act. Any violation resulting in a financial loss to a consumer gives the injured party the right to file a claim against the bond, and if the claim is found to be valid, be compensated for the loss.
The terms of the surety bond agreement, which is a legally binding contract, obligate the principal to pay all valid claims. However, when the bonding company (the “surety” for short) determines that a claim is valid and must be paid, the surety, not the principal, will typically issue payment to the claimant. That’s because in selling a Connecticut money transmitter bond, the surety is agreeing to lend the principal the money needed to pay claims. The surety pays a claim on the principal’s behalf, and the principal repays the debt to the surety, typically in installments rather than as one potentially large lump sum.
What Do They Cost?
The principal will pay an annual premium that is a small percentage of the Connecticut money transmitter bond’s penal sum. Because of the risk inherent in extending credit to the principal, the surety will set a premium rate that’s based largely on the principal’s personal credit score, though other factors also enter into the calculation. A high credit score will earn the principal a low interest rate, in the range of 1% to 3%.
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Our surety bond professionals will get you the Connecticut money transmitter bond you need at a competitive rate.