The Pennsylvania Department of Banking and Securities requires car sales finance companies to post a $10,000 surety bond as part of the business licensure process. The MVSF bond provides protection to the state and to your customers should they suffer losses as a result of misconduct by your company.
The purpose of the bond is to encourage sales finance companies to adhere to all laws, rules and statutes pertaining to the financing or purchase of installment contracts for motor vehicle sales, as stipulated by the Motor Vehicle Sales Finance act. That's why, when you apply for a business license to operate a motor vehicle sales finance company in Pennsylvania, your application must be accompanied by a surety bond in the amount of $10,000.
In the case of Pennsylvania, the state sets the bond amount at $10,000, but your annual premium would be only a small percentage of that. Applicants with good credit scores can pay as little as $100 for their MVSF bond.
If you want to start a MVSF company in Pennsylvania, here are some of the key requirements listed in the Application for Licensure as a Sales Finance Company from the PA Department of Banking and Securities:
A surety bond is a binding legal contract among three entities:
You can avoid claims by not defaulting on any judgments rendered against you. However, in the event of a default, the plaintiff will file a claim against the surety bond, and the surety company will pay the obligation. You must then repay that amount to the surety.