Rhode Island Loan Broker Bond
What is a Rhode Island loan broker bond?
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 that 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:
- The surety: the company issuing the bond, for example, NNA Surety Bonds.
- The obligee: the RI Department of Business Regulation or other agency requiring the bond.
- The principal: the loan broker posting the bond.
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.
How much does a Rhode Island loan broker bond cost?
The cost of your loan broker bond will vary based on several factors, notably:
- Your credit rating
- The finances of your business
- The value of your bond
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.
Get your Rhode Island Loan Broker Surety Bond.
How does a loan broker bond work?
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:
- In the event that your company violates a regulation, a claim can be made against your bond.
- If the claim is upheld, your bond covers any damages and associated fees or fines up to its full value.
- Afterward, you must pay this amount back to the surety.
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.
Why do loan brokers need this bond?
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.
Get your Rhode Island Loan Broker Surety Bond quote.
Who doesn’t need this bond?
The Rhode Island Department of Business Administration exempts some companies from this license and bond. Your organization is exempt if you:
- Are a nonprofit charitable, educational, or religious corporation or association.
- Handle fewer than 6 loans in Rhode Island in any consecutive 12-month period.
- Handle loans to corporations, joint ventures, partnerships, limited liability companies or other business entities.
- Handle loans made by a life insurance company secured by the cash value of a life insurance policy.
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 855-575-1063.