California Debt Collector Bond

October 24, 2023
By Cornerstone Staff

A Comprehensive Guide to the California Debt Collector Bond

In today’s fluctuating economic landscape, debt collection has become an integral part of the business industry. The California Debt Collector Bond, specifically mandated for collection agencies operating within the state, is a pivotal aspect of this landscape. This article aims to offer a comprehensive overview of the California Debt Collector Bond, its purpose, requirements, and how to apply for one.

Understanding the California Debt Collector Bond

As of January 1, 2022, the California Department of Financial Protection and Innovation (DFPI) enacted the Debt Collection Licensing Act, initiating a new collection agency license and bonding requirement for collecting debt in California. The $25,000 surety bond is a key requirement in the licensing process. It is an electronic surety bond (ESB) in NMLS, and a paper bond will not be accepted.

A surety bond is a legally binding contract that guarantees the party purchasing the bond (the principal) will fulfill their obligations to the party requiring the bond (the obligee). In this case, the bond ensures that debt collectors will abide by all state laws and regulations while conducting their business. Should a bonded debt collector fail to meet these obligations, the bond can be claimed upon to compensate any wronged parties.

The Purpose of the Bond

The primary purpose of the California Debt Collector Bond is to protect consumers from any abusive, deceptive, or unlawful practices that debt collection agencies might engage in. It acts as a form of financial guarantee, ensuring that the debt collectors adhere to all rules and regulations set forth by the DFPI.

The bond also ensures that debt collectors handle the money they receive properly and route it to outstanding debts appropriately. Should a debt collector mishandle funds or engage in unethical practices, a claim can be filed against their bond. This bond, therefore, serves as a financial safety net for consumers while also promoting ethical business practices within the debt collection industry. It is important to note that the bond is not an insurance policy for the debt collector but serves as protection for the state and/or the citizens of California.

Who Needs a California Debt Collector Bond?

According to the Debt Collection Licensing Act of California, any person or entity engaged in debt collection on behalf of others or who purchases charged-off consumer debt for collection purposes is required to obtain a license and, therefore, a bond.

This applies to those who regularly engage in debt collection in the ordinary course of business, on their own behalf or on behalf of others. It also includes any person who composes and sells forms, letters, and other media used for debt collection, and any person engaged in the business of purchasing charged-off consumer debt for collection purposes. Regardless of whether a licensed collection agency operates in another state, they will still be required to become licensed and bonded in California to operate within the state.

The Bond Cost

The cost of a California Debt Collector Bond varies based on a number of factors. Normally, you can expect to pay between 0.5%-1.5% of the total bond amount. Cornerstone Surety Bonds will assist you in determining the exact cost.

Why Choose Cornerstone Surety Bonds?

At Cornerstone Surety Bonds, we understand the importance of securing a California Debt Collector Bond quickly so you can submit your license application and get back to focusing on your work. Our team of experienced professionals will guide you through the process, ensuring a stress-free experience. We pride ourselves on our approachable, empathetic, and solution-focused service, aiming to reduce our customers’ burdens and stress. Contact us today to start your application process and get back to focusing on your work.


Cornerstone Staff

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