Surety Bond Encyclopedia

Short Term Lender License (NMLS) Bond - Statewide in Ohio

Brief Summary

The bond is the one license item that can shut down a short-term lender overnight. If coverage lapses, Ohio requires you to stop making short-term loans until a compliant bond is back in place. A bond that renews on time and matches the Division's format keeps the doors open.

Ohio requires a corporate surety bond of at least $100,000 from every licensed short-term lender under Ohio Revised Code 1321.37. The bond runs to the Superintendent of Financial Institutions for the exclusive benefit of borrowers injured by a violation of the Short-Term Loan Act, must match the license term, and must come from a bonding or insurance company authorized in Ohio. Licenses expire every December 31.

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How to Apply for a Short Term Lender License (NMLS) Bond:

Confirm the applicant is not an exempt bank, savings bank, trust company, savings and loan, credit union or qualifying subsidiary.
Document net worth of at least $100,000.
Have the legal name, every trade name and the main office address exactly as they will appear on the license.
Obtain a $100,000 corporate surety bond in the Division's prescribed format.
Pay the $200 investigation fee and the $1,000 per location license fee.
Renew the license and keep the bond continuous so the renewal is received by December 31.

Detailed Information About the Ohio Short Term Lender License (NMLS) Bond:

A lapse stops the lending

Under Ohio Administrative Code 1301:8-11-06, if bond coverage lapses the licensee must cease all short-term lending activity governed by Ohio Revised Code 1321.35 to 1321.48. Failing to obtain a compliant bond within 60 days of the first date of the lapse is grounds for revocation of the license. Applicants tend to treat the bond as a one time filing. The Division treats it as a condition of every day the license is active.

Amount and terms

ORC 1321.37 sets the bond at a penal sum of at least $100,000, in favor of the superintendent, for the exclusive benefit of any borrower injured by a violation by a licensee or any employee of a licensee. The term of the bond must coincide with the term of the license. A nonprofit corporation incorporated under ORC Chapter 1702 posts $50,000 instead. Applicants also need a net worth of at least $100,000.

The bond must be in a format prescribed by the Division, issued in the name of the applicant or licensee with its main office address, and must list any trade or alternative names. One bond may run for more than one license period as long as coverage is continuous through the end of a license period.

Cancellation and the liability tail

A surety cancels by written notice to the superintendent by certified mail, and cancellation is not effective until 30 days after the superintendent receives it. Liability for acts during the bond term continues for at least two years after the bond is terminated or canceled.

Fees and renewal

The application carries a $200 investigation fee and a license fee of $1,000 for each business location, reduced to $500 for original licenses issued on or after July 1. Renewal is $1,000 per location. Licenses expire December 31 each year, and the renewal application must be received by the Division on or before that date.

Who needs the license

Any person making, offering or brokering short-term loans, or assisting a borrower to obtain one, needs the license (ORC 1321.36). Banks, savings banks, trust companies, savings and loan associations, credit unions and certain of their regulated subsidiaries are exempt. Loans under the Act may not exceed $1,000 and run from 91 days to one year under ORC 1321.39, with a shorter minimum allowed in limited income based cases.

Eligibility and Requirements for a Ohio Short Term Lender License (NMLS) Bond:

Bond penal sum of at least $100,000.
Obligee: Ohio Superintendent of Financial Institutions.
Surety must be a bonding or insurance company authorized to do business in Ohio.
Bond term coincides with the license term.
30 days written notice by certified mail before cancellation takes effect.

Ohio Short Term Lender License (NMLS) Bond FAQs:

What happens if our bond lapses?

You must stop all short-term lending activity until a compliant bond is in place. If no compliant bond is obtained within 60 days of the first day of the lapse, the Division has grounds to revoke the license.

How much is the bond?

At least $100,000. Only a nonprofit corporation incorporated under ORC Chapter 1702 qualifies for the $50,000 amount.

Can a bond cover more than one year?

Yes. OAC 1301:8-11-06 allows a bond to run for more than one license period if coverage is continuous and does not expire until the end of a license period.

When does the license expire?

Every December 31. The renewal application must be received by the Division on or before that date, and a licensee that files a timely renewal may keep operating while it is pending.

How does the surety cancel the bond?

By written notice to the superintendent sent by certified mail. Cancellation cannot take effect until 30 days after the superintendent receives the notice, and liability for acts during the bond term continues for at least two years after cancellation.