Throughout the United States there are tons of payday loan advancement businesses claiming to provide quick access to income for those who can’t wait until payday to receive their funds. These businesses generally operate by charging flat fees or interest on the funds you are receiving. For example, your actual payday cheque may be for $500.00, but in order to access the funds earlier it will probably cost you more than what you would have received by waiting. A significant part of consumer debt has been blamed on these types of businesses which essentially create a larger debt hole for consumers to dig out from.
Also called payday loan bonds, a small loan license bond isn’t necessarily required in order to operate a cheque advancement company. This type of business is monitored differently depending on the state it operates in so consumers and business owners alike should contact their state regulator to learn about their state’s requirements. If you reside in a state where these businesses are not required to be bonded, remember that it doesn’t mean that all payday loan operations don’t have a surety bond. An educated consumer should do their research and will perhaps be able to find one such business who is in fact bonded.
With a relatively low cost to the businesses who can expect to pay between 1-5% of the bond value, this is a rather small price to pay to demonstrate integrity to their customers. A lending company whose employee neglects to fulfill an agreed upon service with a client may cause a claim to be filed against the company who can be ordered to recover all costs to the consumer. A surety bond is assurance for the customer that if their funds are mistreated they will be able to recoup their losses. Additionally, this bond prevents the lender from charging excessive fees or interest rates. This is one of the main reasons why consumers seeking loan advancements should only enter into a relationship with a loan company who carries the appropriate bonds.
Companies who are either required by their state’s laws to be bonded, or who seek to provide some peace of mind to their consumers should begin the process by contacting their local state department and requesting a list of the exact requirements to obtaining a license to operate a loan business. In these requirements it should indicate whether or not a small loan license bond is needed. The business owner will be required to fill out forms and provide information on the assets, liabilities and capital of the company, the type of business activity it will be conducting, the proposed methods of funding, and their business registration. Other information may be required as well since each state sets its own parameters.
When a business applies for a small loan license bond, they are applying to an insurance company to be bonded, or covered in the event they cannot cover any claims they are ordered to reimburse. Therefore, depending on the business and owners credit rating they may or may not qualify for bond coverage. Consumers should therefore only seek out the services of a company which is bonded regardless of whether or not the state’s laws require the business to hold a bond. If the owner’s financial situation or that of the company itself results in them having a poor credit rating, then the amount they may need to pay to be bonded will likely be higher. The difficulty is for those seeking money advancements to refrain from dealing with less qualified companies and instead take the time to safeguard themselves by researching the laws in their state and inquiring as to whether or not the business hold a small loan license bond.