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 New York State collection agency license bond needs. Learn how to get a New York state collection agency license, below.
What Collection Agency Licenses Are Issued in New York State?
As of late 2020, New York now licenses collection agencies at the state level. The licensing requirement applies to everyone collecting consumer debt from residents of the state of New York. This includes attorneys and legal firms that collect consumer debt and those who purchase debt and collect it for a profit.
Interestingly, the local collection agency licensing laws that were in place prior to the implementation of state-level licensing have not been repealed. So, if you operate as a debt collection agency based in New York City, Buffalo, or certain other municipalities, or if you collect debts from residents in those jurisdictions no matter where in the state your agency makes its home, you will still need to obtain a collection agency license in that jurisdiction as well.
What Are the Steps in the Licensing Process?
Recent New York State legislation requires licensing of collection agencies operating in the state by the New York Banking Superintendent. When the licensing procedures are fully defined and implemented, all collection agencies seeking licensure in New York State must purchase and submit a New York collection agency license bond in the amount of $25,000.
If you’re also subject to local licensing, that may require a local collection agency bond as well. For example, New York City licenses collection agencies through the Department of Consumer Affairs (DCA) and requires a $5,000 license bond from entities collecting child support debt from city residents.
Why is a New York Collection Agency License Bond Required?
All license surety bonds serve the same purposes:
- To guarantee the licensee’s compliance with applicable legal and ethical standards
- To indemnify the licensing authority against legal liability for damages
- To provide a source of funds for compensating parties financially injured by the licensee’s noncompliance.
A surety bond agreement is legally binding between three parties with different roles and interests. For a New York City collection agency license bond agreement, those three parties are:
- DCA, as the party requiring the bond, is known as the “obligee.”
- The collection agency purchasing the bond is called the “principal.”
- The bonding company authorizing the bond is referred to as the “surety.”
One of the most common violations that can result in a claim against a New York collection agency bond is an agency’s failure to turn over monies collected from debtors to the creditor to whom they are owed. Legal action by the creditor can result in a judgment against the principal, which in turn leads to the creditor filing a claim against the principal’s collection agency license bond.
How Are New York Collection Agency License Bond Claims Paid?
Although the legal obligation for paying claims belongs entirely to the principal, the surety will often pay it initially to ensure prompt payment. The surety will then be reimbursed by the principal.
How Much Does a New York Collection Agency License Bond Cost?
New York collection agency license bonds are sold for a premium that’s a small percentage of the required bond amount. The surety’s main concern is being reimbursed for claims paid on behalf of the principal, so the key factor influencing the premium rate is the principal’s personal credit score. With good credit, that premium rate should be in the range of 1-2%.
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