The Rhode Island Department of Business Regulation requires loan brokers to post a surety bond as part of their licensing process.
In Rhode Island, a loan broker is defined as any business which negotiates, processes, places, sells or solicits a loan on behalf of another party. This includes any loans secured by real estate.
Like other types of surety bonds, your loan broker bond is a contract between three parties:
Surety bonds are not a form of insurance. While an insurance policy protects your lending or broker business, your surety bond protects your clients and the state from any harm arising from misconduct or unlawful acts committed by your business.
The cost of your loan broker bond will vary based on several factors, notably:
Rhode Island requires loan brokers to file a bond in the base amount of $20,000. However, this value may increase depending on your company’s number of locations. If your business operates 4 to 7 locations, you must post an additional $10,000. If you operate 8 or more locations, then you must post an additional $25,000. This means the total value of your bond can range from $20,000 to $45,000.
Regardless of your bond’s value, you will only need to pay a percentage of the amount as an annual premium. Typically, premium rates vary between 1% to 15%, and are based on your credit rating.
NNA Surety Bonds currently offers Rhode Island loan broker bonds with annual premiums as low as $200, based on your credit.
Unlike your insurance policy, which protects your business, your bond helps protect customers while mitigating potential harm to the general public. It does so by encouraging lawful, best practices in your loan brokering operations. Here’s how this is accomplished:
It’s important to understand that upheld claims make obtaining future bonds difficult. Without posting a bond, you cannot be licensed to conduct business in Rhode Island. This, in turn, places your brokerage at risk. In this way, surety bonds promote best practices and mitigate risk.
The simplest answer is that a surety bond has been deemed a licensing requirement for loan brokers by the state of Rhode Island. You cannot legally operate a loan brokerage without posting a bond. The state has chosen to require a surety bond to help promote best practices by brokers and compliance with state and federal laws.
Loan regulations can be complex and may be amended at any time. A surety bond motivates brokers to understand the industry and remain current with state regulations while acting in the best interest of their clients.
The Rhode Island Department of Business Administration exempts some companies from this license and bond. Your organization is exempt if you:
For a full list of exemptions, visit the Nationwide Multistate Licensing System’s Rhode Island state license portal.
Need a RI loan broker bond? Call NNA Surety Bonds at 855-215-2160.