Surety Bond Encyclopedia

Money Transmitter Bond - Statewide in California

Brief Summary

California does not set one bond figure for money transmitters. The security tracks the money you are holding for California customers on an average day, with a $250,000 floor and a $7,000,000 cap. A surety bond lets you meet that requirement without tying up cash or securities with the State Treasurer, and we write it in the form DFPI accepts.

California Financial Code section 2037 requires a licensed money transmitter to keep security for the benefit of California customers. For money received for transmission, the amount is tied to the licensee's average daily outstanding obligations in California and may not be less than $250,000 or more than $7,000,000. The licensee may post cash, approved securities or a surety bond delivered to the Commissioner of Financial Protection and Innovation, who deposits it with the State Treasurer.

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How to Apply for a Money Transmitter Bond:

Calculate your average daily outstanding obligations for money received for transmission in California.
Apply the $250,000 floor and $7,000,000 cap from Financial Code 2037(e).
Add the separate 2037(d) amount if you also sell payment instruments or stored value.
Hold the DFPI pre-filing meeting and file the application through NMLS with the $5,000 fee.
Submit company financial statements and ownership details for surety underwriting.
Deliver the executed bond on the DFPI form to the commissioner.

Detailed Information About the California Money Transmitter Bond:

The amount moves with your outstanding obligations

The most common mistake is treating $250,000 as the California money transmitter bond. It is only the floor. Financial Code 2037(e) ties the security for money received for transmission to the licensee's average daily outstanding obligations for that money in California, with a minimum of $250,000 and a maximum of $7,000,000. As your California volume grows, so does the requirement, until it reaches the cap.

A second requirement if you sell payment instruments or stored value

Section 2037(d) sets a separate security for payment instruments and stored value: the greater of $500,000 or 50 percent of the average daily outstanding payment instrument and stored value obligations in California, up to $2,000,000. Section 2037(f) makes the two requirements cumulative. A company that both transmits money and sells stored value has to carry both amounts.

Bond, cash or securities

Under 2037(a) and (c) a licensee may deposit cash or securities with the Treasurer, or deliver the bond of a surety company in a form, and written by a company, satisfactory to the commissioner. The commissioner then deposits the bond with the Treasurer. The commissioner can also find and order the amount of security needed.

Who the bond protects

The deposits and bond proceeds held by the Treasurer form a trust fund for people in California who bought payment instruments or stored value from the licensee or its agents, or who delivered money to the licensee or its agents for transmission.

The coverage outlasts the license

Section 2037(h) requires the security to cover claims for as long as the commissioner specifies, and for at least four years after the licensee stops providing money transmission services in California. The commissioner may allow a reduction or release sooner if outstanding obligations fall. Plan on keeping the bond in force after you wind down.

Applying

DFPI manages money transmitter licenses through NMLS and asks applicants to set up a pre-filing meeting with the Money Transmitter Division first. The filing fee for a new license is $5,000 and is not refunded if the application is incomplete or inadequate. DFPI posts its bond forms on its money transmitter page. Confirm the current bond form and the amount the commissioner will require with DFPI before the bond is issued.

Premium

At these amounts the surety underwrites the company itself, looking at audited financials, liquidity, ownership and compliance history, and prices the bond from that review and the required amount.

Eligibility and Requirements for a California Money Transmitter Bond:

Surety bond in a form and from a company satisfactory to the commissioner, or a deposit of cash or approved securities.
Bond held by the State Treasurer as a trust fund for California customers.
Money transmission security of at least $250,000 and no more than $7,000,000.
Coverage for at least four years after the licensee stops providing money transmission services in California.
Increase the bond as average daily outstanding obligations grow.

California Money Transmitter Bond FAQs:

Is the California money transmitter bond $250,000?

Only at the low end. Financial Code 2037(e) ties the amount to your average daily outstanding obligations for money received for transmission in California, with a floor of $250,000 and a cap of $7,000,000.

We also sell prepaid stored value. Is that covered by the same bond amount?

No. Section 2037(d) requires separate security for payment instruments and stored value, the greater of $500,000 or 50 percent of average daily outstanding obligations, up to $2,000,000. Section 2037(f) says the two requirements are cumulative.

Can we post cash instead?

Yes. Section 2037 allows cash or securities with a qualifying market value deposited with the Treasurer, or a surety bond delivered to the commissioner.

Can we cancel the bond when we stop doing business in California?

Not right away. The security must cover claims for at least four years after you stop providing money transmission services in California, unless the commissioner allows an earlier reduction or release.

Where do we file?

DFPI manages money transmitter licenses through NMLS. Start with a pre-filing meeting with the Money Transmitter Division. The new license filing fee is $5,000.