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Army Veteran Owned | Expert Surety Bonds Since 2004
Have a question? +1 815-826-6324 (815-8-BondAI) phil@AmericasSuretyBonds.com
Army Veteran Owned | Expert Surety Bonds Since 2004
The Alabama Consumer Credit Act bond is the instrument the State Banking Department accepts in place of tying up $25,000 of your own assets, and it is the piece most new lenders leave until the last minute. You pay an annual premium, the bond names the State of Alabama as obligee, and the executed form goes in with your license application so the Bureau of Loans is not waiting on you.
Alabama licenses consumer lenders under the Alabama Consumer Credit Act, Code of Ala. 5-19-22, which is administered by the State Banking Department, Bureau of Loans. The statute lets the department require a surety bond from an applicant or licensee that extends credit secured by real estate, in lieu of the $25,000 net asset showing every applicant otherwise has to make. The bond runs to the State of Alabama and the department sets its amount. Banks, credit unions, trust companies, savings associations and their holding companies are exempt from licensing and from the bond.
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The Alabama Consumer Credit Act, Code of Ala. Title 5, Chapter 19, requires a license from the State Banking Department before a company can engage in the business of making consumer loans or taking assignments of consumer credit contracts. The department's Bureau of Loans issues the license. Section 5-19-22 sets the licensing terms, and it is the section that creates this bond.
Under 5-19-22 every applicant has to show $25,000 in assets available for the business. For an applicant or licensee that extends credit secured by real estate, the department may instead require a surety bond. The bond is written in favor of the State of Alabama in an amount the department determines, and it is conditioned on the licensee obeying the Act and the department's rules and orders. Read that carefully: the bond is a substitute for the asset showing, not an extra item on top of it, and the department decides when it is required and for how much. Confirm the current figure and the form with the Bureau of Loans before the surety executes it.
Banks chartered by Alabama, another state or the United States, trust companies, savings and loan associations, credit unions, thrift institutions and their holding companies do not need the license and do not post this bond. A seller that extends credit only in its own consumer credit sales is also outside the license requirement. Everyone else in the business of making consumer loans in Alabama, including mortgage lenders that are not banks, needs the license.
The Banking Department splits applicants into two tracks. A company that will extend credit or take assignments of contracts secured by residential real estate files its Consumer Credit Act application through the Nationwide Multistate Licensing System. Every other applicant files the department's non residential application directly. Because the bond provision in 5-19-22 is aimed at real estate secured lenders, the NMLS track is where the bond question usually comes up.
The application carries a $100 investigation fee. The license fee is $500 per office or location each year. The license year runs January 1 through December 31, the annual fee is due January 1, and a 10 percent per month penalty attaches once a renewal is delinquent after February 1. The bond should be kept continuous so it does not lapse across a renewal.
The bond protects the State of Alabama, and through it the public, against a licensee that violates the Consumer Credit Act or the department's rules. If the department establishes a breach, it can recover on the bond up to the penal sum. The surety then looks to the licensee for reimbursement under the indemnity agreement signed when the bond was issued.
No. Code of Ala. 5-19-22 lets the State Banking Department require the bond from an applicant or licensee that extends credit secured by real estate, in lieu of the $25,000 asset showing. Other applicants meet the asset requirement instead. Ask the Bureau of Loans which applies to you before you apply.
The statute leaves the amount to the State Banking Department. It does not fix a dollar figure in 5-19-22. Confirm the current amount with the Bureau of Loans before the surety writes the bond.
No. Banks chartered by Alabama, another state or the federal government, trust companies, savings associations, credit unions, thrift institutions and their holding companies are exempt from the Consumer Credit Act license.
Only if you will extend credit or take assignments of contracts secured by residential real estate. Those companies file the Consumer Credit Act application through NMLS. Non residential lenders file the department's own application directly with the Bureau of Loans.
The license runs January 1 through December 31. The $500 per location annual fee is due January 1 and a 10 percent monthly penalty applies after February 1. Keep the bond continuous so it does not expire with the license year.
Premium is a percentage of the bond amount set by the surety after reviewing the owner's personal credit and the company's financials. Stronger credit and a clean licensing history draw the lowest rate. The premium is paid once a year for as long as the bond stays in force.
This website is a referral and marketing platform that connects users with licensed insurance agents. We do not issue surety bonds directly except in states where we are licensed. All bond applications are processed and fulfilled by licensed agents. By using this site, you agree to our Terms & Conditions, Privacy Policy, and the use of cookies. If you do not agree, please exit the site.
