Credit Service Organization Bonds

What is a credit services organization bond?

A surety bond is a legal tool commonly used by governments to encourage lawful and ethical behavior by businesses.

When operating your credit services organization (CSO), the bond acts as a legal contract between three parties:

• The principal – the credit services organization (also called the policyholder).
• The obligee – the regulatory authority requiring the bond.
• The surety – the company issuing the bond policy.

The bond helps protect your customers and the state from harm caused by any misconduct in how you run your CSO business. In the event that a claim is made against the bond and upheld, damages can be paid up to your policy's liability amount. You will then be required to repay your surety company.

What is a credit services organization (CSO)?

Credit services organizations charge consumers for services such as obtaining credit extensions, improving/repairing credit ratings, and preventing mortgage foreclosures. Due to the sensitive nature of credit services, many states require these types of businesses to post a surety bond before they can be licensed.

How much does a credit services bond cost?

The cost of your CSO bond will vary based on the necessary bond amount, the finances of your organization, and your credit rating. You will only have to pay a percentage of the bond's total amount as an annual fee, which is known as the bond's premium.

Each state will require different bond amounts, which can range from $10,000 in Iowa to $100,000 in California. And premium rates will vary from as low as 1% to as high as 15%, taking into account several financial factors, including the applicant's credit.

Below is a list of the states in which NNA Surety Bonds currently offers policies for credit service organizations. If you don't see your state listed, contact us to verify whether a bond is needed in your state.