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 Arizona collection agency license bond needs. Learn how to get a collection agency license in Arizona, below.
What Collection Agency Licenses Are Issued in Arizona?
The Arizona Department of Financial Institutions (AZDFI) requires individuals and business entities engaged in third-party debt collection to be properly licensed. In a multi-office operation, the main office must be licensed before applying for branch office licenses, with one license per branch.
While license applications can be submitted to AZDFI, the Department is encouraging collection agencies to apply for licensing through the Nationwide Mortgage Licensing System (NMLS), which is faster and more efficient.
What Are the Steps in the Licensing Process?
Our focus here is on the way the licensing process is executed through NMLS, not AZFDI. The NMLS New Application Checklist provides information about completing the appropriate online forms and uploading required supporting documents. You’ll also have to:
- Pay the application fee (currently $1,500)
- Pay the licensing fee (currently $150 to $600, depending on the month in which you apply)
- Pay the FBI’s criminal background check fee (currently $36.25 per person).
Another mandatory step in the process, whether you apply through AZDFI or NMLS, is purchasing an Arizona collection agency license bond in the amount of $10,000, $15,000, $25,000, or $35,000, depending on the applicant’s gross annual income.
Why is an Arizona Debt Collector License Bond Required?
When you purchase an Arizona debt collector license bond, you are pledging to operate in full compliance with the Arizona Revised Statutes Title 32, Chapter 9, which regulates collection agencies. The bond indemnifies the state against liability for any damages caused by a licensed debt collection agency’s unlawful or unethical business conduct. It also serves as a source of funds for compensating the injured party when a court issues a judgment in such cases.
How Are Arizona Debt Collector License Bond Claims Paid?
To understand how claims against a debt collector license bond are paid, it helps to understand who the three parties are in the surety bond agreement, which is a legally binding contract:
- The “obligee” requiring the purchase of the bond is the AZDFI.
- The “principal” is the debt collector purchasing the bond.
- The “surety” is the company underwriting and approving the bond.
The terms of the surety bond agreement place the legal obligation to pay valid claims against the bond on the principal. However, to ensure timely compensation of the claimant, the surety typically pays a valid claim upfront on behalf of the principal and is then repaid by the principal.
How Much Does an Arizona Debt Collector License Bond Cost?
As is the case with most surety bonds, the annual premium for a debt collector license bond is a small percentage of the required bond amount. The surety determines what that rate will be for each bond applicant based primarily on the principal’s personal credit score, though other factors also enter into the picture.
The surety’s main concern is being reimbursed for claims paid on behalf of the principal. So, the premium rate will be lower for a highly creditworthy principal than for one with lesser credit. With a high credit score, the annual premium rate for an Arizona debt collector license bond could be as low as 1%.
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