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Expert Surety Bonds Since 2004
Need assistance? +1 815-826-6324 (815-8-BondAI) phil@AmericasSuretyBonds.com
Expert Surety Bonds Since 2004
The amount is not fixed and it is not set by your revenue. It follows the aggregate dollar amount of student loans you serviced in the preceding calendar year, running $25,000, $50,000, $75,000 or $100,000. Pull that figure first, because it is the same number that goes into your March 15 annual report. Then remember the executed bond has to reach the commissioner within 10 days of execution, filed through NMLS on the state's electronic surety bond form.
Financial Code section 28142 requires a student loan servicing licensee to maintain a surety bond in a minimum amount of $25,000, payable to the commissioner and issued by an insurer authorized to do business in California. Rule 10 CCR 2039 sets the operative schedule at $25,000, $50,000, $75,000 or $100,000 based on the aggregate dollar amount of student loans serviced in the preceding calendar year. The bond covers recovery of expenses, fines and fees levied by the commissioner and losses incurred by borrowers as a result of a licensee's noncompliance, and it is filed through NMLS on the electronic surety bond form titled Surety Bond, Student Loan Servicing Act Licensee Bond.
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Section 28142(a) sets the floor at twenty-five thousand dollars and section 28142(c) lets the commissioner require a higher bond amount based on the dollar amount of servicing of student loans by that licensee. Rule 10 CCR 2039 turns that authority into a schedule keyed to the aggregate loans serviced in the preceding calendar year:
This is portfolio volume, not revenue, not headcount and not the number of borrowers. A servicer with thin fee income and a large book still sits high on the schedule.
Section 28142(a) provides that a licensee operating at multiple locations files only one bond. Adding servicing offices does not stack additional bonds. Only the volume schedule moves the number.
The bond is payable to the commissioner and covers recovery of expenses, fines and fees levied by the commissioner under the division, plus losses incurred by borrowers as a result of a licensee's noncompliance. Both regulator exposure and borrower harm draw on the same penalty.
The executed bond, and any rider or endorsement executed after the effective date, is filed within 10 days of execution.
When an action is commenced on the bond, the commissioner may require a new bond. After any recovery on the bond the licensee must file replacement coverage, and failing to file within 10 days of the recovery or of the commissioner's notification is grounds for suspension or revocation of the license.
Going the other way, 10 CCR 2039 requires the surety company to give at least 30 days notice to the commissioner before cancelling, to notify the commissioner within 10 days of service of any action against the bond, and to notify the commissioner immediately upon payment of any claims. The regulator hears about a claim almost as soon as you do.
Section 28102 states that no person shall engage in the business of servicing a student loan in this state without first obtaining a license, then exempts:
The section also allows a private postsecondary institution to use a licensed servicer without itself becoming licensed for that arrangement.
One definitional carve out matters for collection agencies. Section 28104 excludes a debt collector as defined in Civil Code section 1788.2 whose student loan business involves collecting on defaulted student loans, meaning federal loans unpaid 270 days or more or private loans in default. The exclusion falls away if that collector also services non defaulted student loans. Servicing performing accounts is what pulls a collector into this license.
There is no grandfather clause for a servicer that was already operating and no small servicer waiver of the bond.
Net worth is separate and larger than the bond. Section 28112 requires the applicant to provide audited financial statements prepared in accordance with generally accepted accounting principles showing a net worth of at least $250,000. Posting the bond does not satisfy that test, and meeting the net worth test does not reduce the bond.
Fees under section 28112 are $100 for investigating the application, plus the cost of fingerprint processing and the criminal history record check, plus a $300 application fee. None of it is refundable if the application is denied or withdrawn.
Rule 10 CCR 2039 requires the electronic surety bond form titled Surety Bond, Student Loan Servicing Act Licensee Bond, and provides that bonds, amendments, cancellations and related notices are filed through NMLS. Your surety has to be set up for electronic surety bond filing in NMLS before the bond can be placed on your record.
Section 28146 requires a licensee to file an annual report with the commissioner on or before the 15th day of March covering the preceding calendar year, under oath and in the form the commissioner prescribes, including information about loans sold, assigned or transferred to another party. Those reports are available for public inspection. The same prior year volume that populates that report is what sets your bond tier, so review both at once.
That is the minimum. Section 28142(a) sets $25,000 and 10 CCR 2039 scales it by the aggregate dollar amount of student loans serviced in the preceding calendar year: $25,000 through $50,000,000, $50,000 from $50,000,001 through $100,000,000, $75,000 from $100,000,001 through $250,000,000, and $100,000 over $250,000,000.
No. It is based on the aggregate dollar amount of student loans serviced, meaning portfolio volume. A servicer earning modest fees on a large book still sits at the higher end of the schedule.
No. Section 28142(a) requires only one bond for a licensee operating at multiple locations.
It depends on what you touch. Section 28104 excludes a debt collector as defined in Civil Code section 1788.2 whose student loan business is collecting on defaulted student loans, federal loans unpaid 270 days or more or private loans in default. A collector that also services non defaulted student loans is treated as a student loan servicer and needs the license and the bond.
Section 28102 exempts banks, trust companies and industrial loan companies with the required authorization, federally chartered savings and loan associations, federal savings banks and federal credit unions, state organized savings and loan associations, savings banks and credit unions, a public or private nonprofit postsecondary educational institution servicing a student loan it extended to the borrower, nonprofit community service organizations meeting the section 12104 criteria, and state or nonprofit institutions acting as guaranty agencies under section 428(b) of the Higher Education Act.
Within 10 days of execution, including riders and endorsements. After a recovery on the bond, replacement coverage must be filed within 10 days of the recovery or of the commissioner's notification, and missing that is grounds for suspension or revocation.
At least 30 days notice to the commissioner under 10 CCR 2039. The issuer must also notify the commissioner within 10 days of service of any action against the bond and immediately upon payment of any claims.
No. Section 28112 separately requires audited financial statements prepared under generally accepted accounting principles showing a net worth of at least $250,000. The two requirements answer different questions and neither substitutes for the other.
Section 28112 sets a $100 investigation fee plus the cost of fingerprint processing and the criminal history record check, and a $300 application fee, none refundable if the application is denied or withdrawn. Section 28146 requires an annual report on or before March 15 covering the preceding calendar year, under oath, and those reports are available for public inspection.
Premium is a percentage of the penal sum, so confirming the tier is worth more than shopping the rate when the difference is $25,000 versus $100,000. Sureties underwrite the company: audited financials, net worth against the $250,000 requirement, servicing volume and portfolio mix, borrower funds handling, examination and enforcement history, and the owners' credit, usually with indemnity. A well capitalized servicer with clean examinations prices at the low end of a surety's filed rates. Thin capital, rapid portfolio growth, or a prior claim prices higher and can require collateral.
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