Overview of Texas Money Services Bond Requirements
If you want to conduct currency exchange or money transmission services in the state of Texas, you will need to apply for a license from the Texas Department of Banking. An essential requirement to getting licensed, especially for money transmission, is to submit a money transmitter bond. The amount of this bond can vary between $300,000 and $2,000,000, and is determined when you apply for a license.
This bond guarantees that the licensed business will comply with the provisions of the Texas Finance Code in offering money exchange or transmission services. It also guarantees money services businesses will pay any delinquent fees, assessments, penalties or else if required to do so by the Texas Banking Commissioner.
If a business does not comply with the conditions of the bond or the Finance Code, and causes harm or losses to their clients or the state of Texas, a claim can be filed against their bond. Under a claims process, the surety which backs the bond can extend compensation to claimants which can be as high as the full penal sum of the bond, also known as the bond amount.
If this is your first time getting bonded and you want to know more, our detailed ‘What is a surety bond’ guide is a good place to start!
See the sections below for an overview of the cost of your bond, why and how bond claims occur, and how to apply for this bond.
If you need to know more about this bond or surety bonds in general, call us at 866.450.3412 anytime!
Cost of Your Bond
The cost of your bond is equal to a small percentage of the total amount of your bond.
Subchapter D of Chapter 151 of the Texas Finance Code specifies that applicants for a money money transmission license must post a bond in an amount between $300,000 and $2,000,000.
Specifically, the amount has to be the greater of $300,000 or 1% of the business’s total yearly dollar volume of transmissions or projected total volume within the first year of conducting business, but not higher than $2,000,000.
When you apply for the bond, the surety will offer you a rate at which you can get bonded which is based on your credit score as well as other indicators such as your financial statements, assets, liquidity and more. Because performing money transmission services involves having access to a lot of funds, these bonds are considered a higher risk, and rates are higher than for most bonds.
If you have a credit score of 700 FICO or above, you can expect to get a rate on your bond between 1% and 4% of its total amount.
If you’d like to know how much exactly your bond will cost, complete our application form and we will soon contact you with an exact quote!
Requesting a quote is free of charge and there are no obligations attached!
Bad Credit Bond Program
Not all applicants for surety bonds have perfect credit scores, yet this should not stop you from applying! Through our Bad Credit Program you can get approved for a bond as easily as applicants with high scores.
Due to the nature of this bond and because applicants with lower scores are perceived as a higher risk by the surety, rates under this program are higher than for applicants with higher credit. Your bond rate is not a one-time thing and can be significantly reduced over time as you improve your credit score.
See the program page for more information about getting a bond with lower credit.
Claims Against Your Bond
Bond claims occur when a bonded person or business violates the conditions of the bond agreement and thereby causes losses or damages to the bond obligee (the party that is protected by the bond).
In Texas, this bond is for the benefit of both the Texas Department of Banking as well as any customer of the money transmitter. For example, if the bonded business does not comply with the requirement of the Department to pay a penalty or a fee, a claim against their bond may arise. Similarly, if the bonded business misuses funds that it receives by its clients for money transmission or engages in fraud or theft, a claim can also be filed.
Claims against bonds can be as high as the full bond amount. When a claim occurs, the surety may initially compensate claimants. But under the bond agreement, the bonded business must ultimately bear the costs of any claims against their bond. In other words, any compensation a surety extends to claimants must be repaid to it by the bonded business in full.
Due to the high bond amounts for money services businesses, having to deal with a claim can be very disruptive to your operations and harm your finances and reputation significantly. That’s why you should always strive to avoid situations that may give rise to bond claims.
Apply for Your Bond!
Complete our bond form to get started. We will provide you with a free quote on your bond along with further directions on how to finalize your application.
Your bond will be issued in about two working from the date we receive your full application. We will then forward it to you via post and email.
If you have any questions about the bonding requirements for money services businesses in Texas or anything else related to surety bonds, call us at 866.450.3412!