Surety Bond Encyclopedia

Flexible Credit License - NMLS Bond - Statewide in Tennessee

Brief Summary

Tennessee prices the flex loan bond by location: $25,000 for each one, never more than $200,000 for a single licensee. A one store lender needs $25,000. The eighth location reaches the cap, and locations after that add nothing. We write the bond to the commissioner at the amount your location count requires and update it when you open another office.

Under Tenn. Code Ann. 45-12-106, an applicant for a Tennessee flexible credit license files a surety bond of $25,000 for each location, with the total for a single licensee capped at $200,000. The bond is payable to the Commissioner of Financial Institutions for anyone injured under a flex loan plan by the licensee's fraud, misrepresentation, breach of contract, financial failure or violation of the Flexible Credit Act. An irrevocable letter of credit can be used in its place, and all filings go through NMLS.

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How to Apply for a Flexible Credit License - NMLS Bond:

Count every location from which you will make flex loans, since each needs its own license.
Multiply by $25,000 to set the bond, stopping at $200,000.
Have the legal entity name and NMLS ID exactly as shown on the TDFI filing.
Provide the audited financial statement and owner details for the surety's underwriting review.
Approve the quote and receive the bond payable to the Tennessee Commissioner of Financial Institutions.
Submit the bond through NMLS with the $500 filing fee, and increase it when you add a location.

Detailed Information About the Tennessee Flexible Credit License - NMLS Bond:

The amount is a count of locations

Tennessee requires a separate flexible credit license for each location from which flex loan business is conducted, and the bond follows that count at $25,000 per location. The statute caps the aggregate bond for a single licensee at $200,000, so the figure stops rising at the eighth location.

1 location: $25,000
3 locations: $75,000
8 or more locations: $200,000

A lender does not escape the license by lending remotely. Tennessee treats a person as engaging in the flex loan business when it induces a consumer located in the state to enter a flex loan plan through the internet, telephone, facsimile or other means.

Who issues it and what it covers

The bond must be issued by an insurer regulated under title 56 that is not affiliated with the applicant. It is payable to the commissioner for the benefit of any person injured under a flex loan plan by the licensee's fraud, misrepresentation, breach of contract, financial failure or violation of the chapter.

An irrevocable letter of credit in the same amount, from a federally insured bank, savings bank or credit union not affiliated with the applicant, is accepted instead. Letters of credit must have terms of at least three years and be renewed annually.

Three years after the license ends

The bond or letter of credit must be maintained for at least three years after the license expires, is revoked or is surrendered. Closing the business does not end the obligation.

The rest of the application

Section 45-12-104 requires tangible net worth of at least $50,000 for each location, and the requirement is continuing. The application includes an audited financial statement prepared by an unaffiliated certified public accountant and a $500 nonrefundable filing fee that serves as the first year's license fee. Licenses expire December 31. Renewal runs November 1 through December 31 with a $500 renewal fee, unless the commissioner substitutes a supervision fee. TDFI requires applications, amendments and renewals to be filed through NMLS.

Eligibility and Requirements for a Tennessee Flexible Credit License - NMLS Bond:

$25,000 per location, with a $200,000 maximum for one licensee.
Issued by an insurer regulated under Tennessee title 56 that is not affiliated with the applicant.
Payable to the commissioner for the benefit of persons injured under a flex loan plan.
Tangible net worth of at least $50,000 for each location, maintained continuously.
Bond kept in force for at least three years after the license expires, is revoked or is surrendered.

Tennessee Flexible Credit License - NMLS Bond FAQs:

We run three storefronts. How much bond do we need?

$75,000. Each location needs its own license and $25,000 of bond coverage. The total only stops climbing at $200,000, which you reach with eight locations.

We lend online only. Does this apply to us?

Yes, if you lend to Tennessee consumers. Section 45-12-103 treats a lender that induces a consumer located in Tennessee to enter a flex loan plan through the internet, telephone or other means as engaging in the business in the state. The bond is figured on the locations from which the business is conducted.

Can we use a letter of credit instead of a bond?

Yes. Section 45-12-106 accepts an irrevocable letter of credit in the same amount from a federally insured bank, savings bank or credit union not affiliated with the applicant. It must have a term of at least three years and be renewed annually, which ties up a credit line that a surety bond leaves free.

If we surrender the license, can we cancel the bond?

No. The bond or letter of credit has to stay in place for at least three years after the license expires, is revoked or is surrendered, so customers harmed before you closed still have a source of recovery.

When does the license renew?

Every Tennessee flexible credit license expires December 31. The renewal application and $500 renewal fee are due between November 1 and December 31, filed through NMLS, and the bond must stay current through the renewal.