Surety Bond Encyclopedia

Consumer Debt Management Service Bond - Statewide in Texas

Brief Summary

Texas does not use one flat number for this bond. The amount depends on whether you hold consumer money and how large your trust account balance has been, so work out the figure before you file. The bond is written on the OCCC's own ADM79 form, names the Office of Consumer Credit Commissioner as obligee, and is filed with your registration.

Debt management services providers registering with the Texas Office of Consumer Credit Commissioner must file a surety bond or an approved insurance policy under Texas Finance Code 394.206. A provider that does not hold consumer money for disbursement posts $50,000. A provider that does hold consumer money posts $50,000 or $100,000 on its first application, depending on its trust account balance, and at renewal posts at least its average daily balance, with a $25,000 floor and a $100,000 ceiling.

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How to Apply for a Consumer Debt Management Service Bond:

Decide whether your company receives and holds consumer money for disbursement to creditors. That answer sets which bond amount applies.
If you hold consumer money, calculate the average daily balance of the trust account serving Texas consumers for the six months before the bond is issued.
Have the bond written on OCCC form ADM79 with the Office of Consumer Credit Commissioner of the State of Texas as obligee.
Apply online through the OCCC ALECS system with the application questionnaire, owner disclosure, list of offices, fee worksheet and the executed bond.
Renew each January, by January 31, and carry a bond sized to the current trust account balance.

Detailed Information About the Texas Consumer Debt Management Service Bond:

Which amount applies to you

The amount turns on one question. Does your company receive and hold money paid by or for consumers so it can pay their creditors?

If it does not, the bond is $50,000, both on the first application and at every renewal.

If it does, the figure follows the average daily balance of the trust account serving Texas consumers over the six months before the bond is issued. Under 7 Texas Administrative Code 88.102, a first application calls for $50,000 when that balance is under $50,000 and $100,000 when it is $50,000 or more. At renewal, the bond must equal or exceed the average daily balance and can never be less than $25,000. Once the balance reaches $100,000, the bond is $100,000. Texas Finance Code 394.206(d) lets the commissioner adjust the amount only when you apply for renewal and ask for a review.

Who has to register

Texas Finance Code 394.204 bars any person, whether or not located in Texas, from providing a debt management service to a Texas consumer without registering with the commissioner. Section 394.203 carves out several groups, including licensed attorneys who do not hold themselves out as providers or work for one, financial institutions as defined in Section 201.101, title insurance and abstract company employees doing escrow work, judicial officers and people acting under court order, representative payees, and people who pay a consumer's debts using only the consumer's money without starting contact with creditors.

Bond or insurance

A provider can file either a surety bond or evidence of an insurance policy in a form the commissioner approves. The insurance route requires coverage for professional liability, employee dishonesty, depositor's forgery and computer fraud of not less than $100,000, from a company rated at least A- by a nationally recognized rating organization, with 30 days advance written notice of termination to the commissioner.

What the bond covers

The bond runs in favor of the State of Texas for the use of the state and of anyone with a cause of action under the subchapter. It is available to pay damages and penalties to consumers directly harmed by a violation, and it is conditioned on the provider and its agents complying with state and federal law governing debt management services. It must run concurrently with the registration period and be issued by a company authorized to do business in Texas.

Form, term and renewal

The OCCC prescribes form ADM79, Surety Bond (Consumer Debt Management Services), with the Office of Consumer Credit Commissioner of the State of Texas as obligee. The bond stays in effect for the entire registration term and carries over with each renewal unless the surety gives the commissioner at least 30 days written notice. A first registration runs from issuance until January 31. After that, each term runs from February 1 to January 31, the annual fee and renewal information are due by January 31, and a registration that is not renewed expires on January 31 under 7 TAC 88.201.

Eligibility and Requirements for a Texas Consumer Debt Management Service Bond:

$50,000 bond for providers that do not receive and hold consumer money.
$50,000 or $100,000 on a first application for providers that hold consumer money, based on the six-month average daily trust account balance.
At renewal, at least the average daily balance, never less than $25,000, and $100,000 once the balance reaches $100,000.
Surety company authorized to do business in Texas.
Bond term running concurrently with the registration period.

Texas Consumer Debt Management Service Bond FAQs:

We never hold client money. What amount do we need?

$50,000. A provider that does not receive and hold money paid by or on behalf of consumers for disbursement to their creditors posts a $50,000 bond on the first application and at each renewal.

We run a trust account. Is the bond always $100,000?

No. On a first application it is $50,000 if the six-month average daily balance of the trust account serving Texas consumers is under $50,000 and $100,000 if it is $50,000 or more. At renewal it must equal or exceed the average daily balance, with a $25,000 minimum, and it is $100,000 once the balance reaches $100,000.

Can we carry insurance instead of a bond?

Yes. Texas Finance Code 394.206 accepts evidence of an insurance policy in a form the commissioner approves, covering professional liability, employee dishonesty, depositor's forgery and computer fraud for not less than $100,000, from an insurer rated at least A-, with 30 days advance written notice of termination to the commissioner.

Can the bond amount change mid-year?

The commissioner may adjust the bond or insurance amount only when the provider applies for renewal and requests a review of the amount.

Who can make a claim on the bond?

The bond runs to the State of Texas for the use of the state and anyone with a cause of action under the subchapter, and it is available to pay damages and penalties to consumers directly harmed by a violation.

When does the registration renew?

Every registration expires January 31. The annual fee and renewal information are due by January 31, and the renewed term runs from February 1 to the next January 31.