Rhode Island Small Loan Lender Bond
What is a Rhode Island small loan lender bond?
The Rhode Island Department of Business Regulation requires small loan companies to post a surety bond to receive their business license. The state defines a small loan lender as a business that offers consumer loans in amounts of less than $5,000. In addition, these loans cannot be backed by real estate.
Like other surety bonds, your small loan lender policy acts as 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 small loan company posting the bond.
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 small loan company bond cost in RI?
The cost of your RI bond is based on several factors, including:
- The amount of your bond
- Your personal credit rating
- The finances of your small loan company
Rhode Island requires a base bond in the amount of $10,000. If your small loan company has multiple branches, you will be required to post an additional amount. You must increase your bond value by $10,000 if your business operates from 4 to 7 branch locations or by $25,000 if your business operates from 8 or more locations. This means the total value of your bond can range from $10,000 to $35,000, depending upon your number of locations.
Regardless of the bond amount you must post, you will only have to pay a small percentage of the bond as an annual premium. This percentage varies based on multiple factors. One of the most important factors is your credit rating. Generally, premiums range from 1% to 15% of the bond value.
NNA Surety Bonds currently offers Rhode Island small loan lender bonds with annual premiums as low as $100, based on your credit.
Get your Rhode Island Small Loan Lender Bond.
How does a small loan lender bond work?
Your small loan lender surety bond is different from an insurance policy. While your insurance policy is meant to protect your business, your bond policy protects your customers and helps mitigate harm to the general public. It does this by encouraging lawful practices by your loan company. Here's how:
- In the event that your lending company breaks a law or regulation, a claim can be made against your bond.
- If the claim is upheld, your bond is used to pay any damages and associated fees or fines up to the full value of the bond.
- Afterward, you will be required to pay this amount back to the surety.
Upheld claims make obtaining future bonds challenging. Without posting a surety bond, you cannot continue to conduct business in Rhode Island, thus, jeopardizing your loan company. In this way, surety bonds help encourage best practices and mitigate damage to the public.
Why do small loan lenders need a surety bond?
The most important reason for having a bond is because Rhode Island requires small loan lenders to post one. In many cases, regulations on lending are complex and commonly amended. A surety bond encourages lenders to both fully understand and remain current with state regulations while acting in the best interest of the consumer.
Get your free Rhode Island Small Loan Lender Bond quote.
Questions? Call NNA Surety Bonds at 855-575-1063.