Surety Bond Encyclopedia

Consumer Discount Company ($5,000) Bond - Statewide in Pennsylvania

Brief Summary

A $5,000 bond is a small line item next to everything else in a Pennsylvania consumer discount company application, but the license does not move without it. The thing to get right is scope. If anyone on your staff will originate mortgage loans, that takes a separate Mortgage Consumer Discount Company license with its own, much larger bond, and finding that out late can stall a launch.

Pennsylvania licenses consumer discount companies under the Consumer Discount Company Act, 7 P.S. 6201 through 6219, administered by the Department of Banking and Securities. This $5,000 license bond is filed with the Department as part of the license application through the DoBS Portal. A consumer discount company whose employees act as mortgage originators also needs a separate Mortgage Consumer Discount Company license, which carries its own bond.

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How to Apply for a Consumer Discount Company ($5,000) Bond:

Confirm the current bond amount and the Department's bond form with the Pennsylvania Department of Banking and Securities.
Have the company's legal name and business address exactly as they appear on the DoBS Portal application.
Complete the bond application and the surety's underwriting review.
Pay the premium and receive the executed $5,000 bond.
File the bond with the license application through the DoBS Portal as the Department directs.
If any employee will originate mortgage loans, apply separately for the Mortgage Consumer Discount Company license and its bond through NMLS.

Detailed Information About the Pennsylvania Consumer Discount Company ($5,000) Bond:

What this bond is for

The Pennsylvania Department of Banking and Securities licenses consumer discount companies under the Consumer Discount Company Act, the Act of April 8, 1937, P.L. 262, No. 66, found at 7 P.S. 6201 through 6219. The Department's rules for these companies are in 10 Pa. Code Chapter 41. The licensed company posts this $5,000 bond with the Department as the obligee. It backs the company's compliance with the Act and the Department's regulations, and the surety pays valid claims up to the bond amount and then looks to the company for repayment.

Confirm the current bond amount, the bond form and the filing steps with the Department of Banking and Securities before the bond is issued, so the bond matches what the Department will accept.

Mortgage lending takes a second license

This is where applicants most often get caught. A business entity that holds a Consumer Discount Company license and has employees who act as mortgage originators also needs a Pennsylvania Mortgage Consumer Discount Company license, filed through NMLS under the state's mortgage licensing law. That license has its own bond, sized by the company's Pennsylvania mortgage loan origination volume, and the NMLS description of the license starts that bond at $100,000. The $5,000 consumer discount company bond does not satisfy it.

Where the license is filed

The Department lists the Consumer Discount Company license as one handled through the DoBS Portal, while the mortgage license is handled through NMLS. Have the legal name and address on the bond match the portal application exactly.

Auto financing

Pennsylvania's motor vehicle sales finance law, 12 Pa.C.S. Chapter 62, states that it does not affect or impair business conducted lawfully under a Consumer Discount Company Act license. Licensed sales finance companies and collector repossessors under that chapter post their own separate bonds.

Eligibility and Requirements for a Pennsylvania Consumer Discount Company ($5,000) Bond:

Bond in the listing amount of $5,000, with the Pennsylvania Department of Banking and Securities as obligee.
Bond on the form the Department accepts, written by a surety the Department accepts.
Company name on the bond matching the license application exactly.
Licensing under the Consumer Discount Company Act, 7 P.S. 6201 through 6219, and 10 Pa. Code Chapter 41.
A separate Mortgage Consumer Discount Company license and bond if employees act as mortgage originators.
Underwriting review of the company and its owners, which sets the premium.

Pennsylvania Consumer Discount Company ($5,000) Bond FAQs:

Who is the obligee on this bond?

The Pennsylvania Department of Banking and Securities, which licenses consumer discount companies under the Consumer Discount Company Act. Confirm the exact obligee wording and form with the Department before the bond is issued.

Does the $5,000 bond cover mortgage lending?

No. A consumer discount company with employees who act as mortgage originators also needs a Pennsylvania Mortgage Consumer Discount Company license through NMLS. That license has its own bond based on Pennsylvania mortgage origination volume, starting at $100,000 in the NMLS license description.

Where is the license application filed?

The Department lists the Consumer Discount Company license as one handled through the DoBS Portal. The mortgage version of the license is handled through NMLS.

What law governs these companies?

The Consumer Discount Company Act, Act of April 8, 1937, P.L. 262, No. 66, at 7 P.S. 6201 through 6219, along with the Department's regulations in 10 Pa. Code Chapter 41.

What happens if a claim is paid on the bond?

The surety pays a valid claim up to the bond amount and then seeks repayment from the licensed company. The bond protects the public and the Commonwealth, not the company.