Overview of Alabama Money Transmitter Bond Requirements
Section 8-7A-7 of the Alabama Monetary Transmission Act requires that applicants for a money transmitter license must obtain and maintain a money transmitter bond.
The minimum amount for this bond is set at $100,000 but can be increased to as much as $5,000,000 by the Commission if the financial condition of a licensee deteriorates over time.
Who needs to get this bond?
This bond is needed by anyone who engages in the business of money transmission in the state as defined by the Code of Alabama.
According to the Code, money transmission is the “selling or issuing payment instruments, stored value, or receiving money or monetary value for transmission”.
Why do I need a bond?
This bond is required to guarantee that a money transmitter will perform their obligations and responsibilities faithfully, and in compliance with all legal requirements in the state.
It is also a form of protection to the state, and the transmitter's clients. If a transmitter violates the provisions of the Alabama Monetary Transmission Act and causes harm to any person, they may have a claim filed against their bond in order for the claimant to be compensated. Such compensation can be as high as the full amount of the bond. You can find out more information about the claim process further down this article.
If you are unfamiliar with how surety bonds work, see our ‘What is a surety bond' guide to learn more!
See the sections below for more information about the cost of the bond, what a bond claim is, and how you can apply.
For any further questions about the bonding requirements in the state or to receive assistance, call us at 866.450.3412!
What is the Cost of the Alabama Money Transmitter Bond?
The cost of your bond, or bond premium, is a fraction of the full amount of your bond. This percentage is determined by the surety you apply with.
The minimum amount for the Alabama money transmitter bond is the greater of either $100,000, or the “average daily outstanding obligations for money received for transmission in the state plus 50% of the average daily outstanding payment instrument and stored value obligations in Alabama".
In certain cases, the Alabama Securities Commission may increase the bond amount for an applicant upwards to but not excluding $5,000,000.
Your bond premium will be based on your bond amount and is influenced by the following factors.
Which factors determine my bond cost?
The most important factor which influences the cost of your bond is your personal credit score. The higher your score, the lower your rate is more likely to be. Other important factors that are taken into account by sureties are:
Personal and business financial statements
Any fixed and liquid assets
Professional experience and work record
Typically, an applicant with a credit score of 700 or more will be bonded at our lowest possible rates, or about 1%-4% of the total amount of their bond.
Want to get a free estimate of the rate at which you can get bonded? Try our bond calculator below!
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What if I have low credit?
While a high credit score will usually make for a better rate, you can get bonded with a lower score as well. In that case, it means that your rate will likely be higher, due to the increased risk which sureties perceive in such applicants with lower scores.
Yet, if you improve your credit score over time, you can get a better rate every time you renew your bond. Learn more about getting bonded with a low score at the Bad Credit Program page!
When Does a Bond Claim Occur?
The bond you obtain is intended to provide protection to the bond obligee, the state, as well as the clients you offer your services to.
The Alabama money transmitter bond form states that it is for the benefit of any creditor of the transmitter for any “liability incurred in connection with the selling or issuing payment instruments, stored valued instruments, or receiving money or monetary value for transmission in the state of Alabama damaged by any failure to comply with the provisions of the Alabama Monetary Transmission Act or by any breach of the conditions, of the bond agreement.”
So, if a money transmitter commits a violation, their clients may file a claim against their bond to be compensated for any losses they suffer. The surety that backs the bond will then investigate the situation and extend as much compensation as needed, though not more than the full amount of the bond.
Once a claim is handled by the surety, the bonded transmitter must repay it in full. This is due to the condition in all bond agreements that the bonded party is liable for any claims that arise against the bond.
Since the amount for these bonds can be quite high, and a claim can take a long time to be resolved, it is better to always comply with the conditions of the bond and avoid giving rise to a claim.
Ready to get bonded? Complete our simple bond application form, and we will contact you shortly with your free quote and further information about the bonding process.
You can always call us at 866.450.3412 if you have any surety bond related questions!