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 North Carolina collection agency license bond needs. Learn how to get a collection agency license in North Carolina, below.
What Collection Agency Licenses Are Issued in North Carolina?
North Carolina’s Department of Insurance licenses collection agencies, including debt buyers who purchase consumer debts and collect them for a profit.
What Are the Steps in the Licensing Process?
All debt collector agency licenses are now processed through a system called Clarus, which recently replaced the North Carolina License Management System.
You’ll need to take the following steps:
- Make sure you meet the eligibility requirements
- Complete the license application
- Obtain required supporting documents,
- Purchase a North Carolina collection agency license bond
- Pay the processing and licensing fees (currently totaling $1,048)
- Submit everything for approval
Why is a North Carolina Debt Collection Agency License Bond Required?
The amount of the North Carolina debt collector bond you’ll need to purchase depends on where your business is located. For North Carolina (domestic) debt collectors, the required bond amount is $10,000. That amount increases to $20,000 for debt collectors based in another state (foreign agencies) and to $40,000 for collection agencies based outside of the U.S. (alien agencies).
A North Carolina debt collection agency license bond is a debt collector’s pledge to do business in a completely lawful and ethical manner. Failure to do so, for example, by failing to remit funds collected from debtors to the creditors, can result in a judgment against the collection agency and a claim against the license bond.
How Are North Carolina Debt Collector Bond Claims Paid?
The surety bond agreement is a legally binding contract that gives certain rights and responsibilities to three parties. In the case of a North Carolina debt collection agency bond, these are as follows:
- The “obligee” requiring the purchase of the bond is the North Carolina Department of Insurance.
- The “principal” is the debt collector required to purchase the bond as a prerequisite for licensing.
- The “surety” is the bonding company that approves the bond for the principal.
The surety bond agreement makes the principal solely responsible for paying valid claims, up to the required bond amount, which is also called the bond’s “penal sum.” This is the most that will be paid to a claimant. Even though it’s the principal’s responsibility to pay claims, the surety will often pay them on the principal’s behalf and then collect reimbursement from the principal.
How Much Does a North Carolina Debt Collector License Bond Cost?
To calculate the annual premium for a North Carolina debt collector license bond, multiply the bond’s penal sum by the premium rate set by the surety. The surety’s main concern is the risk that comes from paying claims on behalf of the principal, so the underwriters place heavy emphasis on the principal’s personal credit score.
The higher the principal’s credit score, the less the perceived risk and the lower the premium rate. With good credit, the premium rate may be as low as 1% of the bond’s penal sum.
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