Overview of California Money Transmitter Bond Requirements
According to the California Financial Code, a money transmitter bond is required of applicants for a money transmitter license in the state. The bond must be deposited the State Treasurer to act as a guarantee that licensees will comply with their legal obligations.
The amount of the bond differs greatly and may be between $250,000 and $7,000,000 which depends on the amount and type of business performed by the licensee.
If a money transmitter violates the Act through fraud, misrepresentation or misappropriation and thereby causes harms and losses to consumers a claim can be filed against their bond. Such claims can be as high as the full amount of the bond, also known as the penal sum of the bond.
If you are new to bonds, see our detailed ‘What is a surety bond’ guide for further explanations about how bonds work and why they are required.
The sections below will take you through all the important aspects of this type of surety bond - the cost of getting bonded, why and how bond claims arise, and how you can get bonded.
If you have any further questions about the bonding conditions and requirements for money transmitters in California, call our surety professionals at 866.450.3412!
Cost of Your Bond
The cost of your bond is equal to a percentage of the full amount of the bond you are required to get. According to Chapter 3 of the Money Transmission Act, the amount of the bond that licensees need varies between $250,000 and $7,000,000. The exact amount depends on whether licensees “sell or issue payment instruments or stored value” and whether they “engage in receiving money for transmission” and the amounts thereof.
The cost of getting bonded is a fraction of the final bond amount. It is determined by the surety that issues the bond, based on your personal credit score as well as your financial statements, personal assets, liquidity, and more. The higher your credit score, the lower your bond rate.
Due to the nature of money transmitters’ business, issuing these bonds is considered a higher risk than most other bonds, and therefore starting rates are somewhat higher. Applicants with high credit, such as a FICO score of 700, can expect a rate that varies between 1% and 4%.
To find out how much exactly your bond will cost, complete our bond application form and we will contact you with a free and exact quote!
Bad Credit Bond Program
Unlike other sureties, despite the increased risk in underwriting such bonds, we also provide them to applicants who have lower credit scores!
If you have a lower credit score, but you require a money transmitter bond, you can apply for one through our Bad Credit Program! Rates for applicants with lower credit are higher but you can still rely on our surety partners to offer you the best possible rate! You can also qualify for better rates in the future by improving your credit score!
Quotes are issued on a case-by-case basis, so make sure to submit a bond application form to find out how much exactly you would need to pay to get this bond!
Claims Against Your Bond
A surety bond claim occurs when a bonded party violates the bond agreement’s conditions and causes losses or damages to the parties the bond protects.
According to the California Money Transmission Act, the surety bond provided by the licensee is to act as security that is “conditioned upon the faithful performance of the obligations of the licensee with respect to money transmission in California.”
The Act further states that the bond “shall constitute a trust fund for the benefit of persons in California who purchased payment instruments or stored value from the licensee or its agent, or persons in California who delivered to any licensee or its agent money or monetary value for money transmission.”
If the licensee violates this condition through dishonest practices like fraud, misrepresentation, dishonesty, misappropriation of funds, negligence or by, suspending payment of its obligations, a claim against the bond can be filed.
Under a legitimate bond claim, compensation is extended to claimants. The amount of such compensation may be as high as the full amount of the surety bond. Typically, sureties extend compensation to claimants but under the bond agreement, the bonded money transmitter must then reimburse the surety in full for any such payments.
Apply for Your Bond Today!
Complete the bond application form to request a free and precise quote! We will also provide you with additional information on finalizing your application.
It will take about two working days for your bond to be issued, once we have your full application. We will then send you your bond via standard mail and via email.
Want to know more about this bond? Call our bond experts at 866.450.3412 anytime!