Money Services Bond - Statewide in Texas

Brief Summary

Texas sets two different bond formulas for money services, and most applicants size the bond wrong. A money transmitter posts between $100,000 and $500,000 depending on its net worth and Texas transmission liability. A currency exchange posts as little as $2,500. Knowing which formula applies to you before you file in NMLS saves a rider and a delay.

Texas Finance Code Chapter 152 requires every money services licensee to keep security on file with the Texas Department of Banking. A money transmission licensee posts $100,000, or up to $500,000 if its tangible net worth is 10 percent of total assets or less. A currency exchange licensee posts $2,500 if it deals with Texas customers only at physical locations, and otherwise the greater of $2,500 or 1 percent of its prior year Texas currency exchange volume, capped at $1 million.

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How to Apply for a Money Services Bond:

• Decide which license you need: money transmission, currency exchange, or both.
• For money transmission, compare tangible net worth to total assets to find your tier, and calculate average daily Texas transmission liability if the 10 percent test puts you in the variable tier.
• For currency exchange, confirm whether you deal with Texas customers only at physical locations, or calculate 1 percent of prior year or projected Texas volume.
• Complete the bond application and provide company financial statements for underwriting.
• File the money transmission application through NMLS with the $10,000 nonrefundable fee, or the currency exchange application directly with the Department with the $5,000 nonrefundable fee.
• Submit the executed bond to the Texas Department of Banking and keep it in force at the required amount.

Detailed Information About the Texas Money Services Bond:

Two licenses, two formulas

Texas licenses money services under Chapter 152 of the Finance Code. A money transmission license covers payment instruments, stored value, money transmission services and payroll processing. A currency exchange license covers only exchanging one government's currency for another's. Each carries its own security requirement, and the amounts are not close.

Money transmission: $100,000 to $500,000

Under Finance Code 152.352 the amount depends on the licensee's balance sheet.

• Tangible net worth greater than 10 percent of total assets: $100,000.
• Tangible net worth of 10 percent of total assets or less: the greater of $100,000 or 100 percent of the licensee's average daily money transmission liability in Texas for the most recently completed three month period, up to a maximum of $500,000.

A licensee that keeps the bond at the $500,000 maximum does not have to calculate its average daily money transmission liability for this purpose.

Currency exchange: $2,500 up to $1 million

Under Finance Code 152.353 the amount is $2,500 if the licensee conducts business with persons in Texas exclusively at one or more physical locations. Any other currency exchange licensee posts the greater of $2,500 or 1 percent of its total dollar volume of Texas currency exchange business for the preceding year. An applicant may use its projected first year volume. The maximum is $1 million.

What the bond covers and how long

Under Finance Code 152.354 the security must be in a form satisfactory to the banking commissioner. Claimants may sue on it directly, and the commissioner may also use it to collect delinquent fees, assessments, costs or penalties. The security must cover claims for at least five years after the licensee surrenders its license or stops the licensed activity, so the bond cannot simply be dropped when the business closes. If the security becomes deficient or exhausted, the commissioner can require more. With the commissioner's approval, a licensee may keep a deposit in lieu of a bond.

Who does not need a license

Finance Code 152.004 excludes certain persons, including federally insured depository financial institutions, bank holding companies, the U.S. Postal Service and government agencies. Check that section before assuming an exclusion applies to you.

Eligibility and Requirements for a Texas Money Services Bond:

• Surety bond in a form satisfactory to the Texas banking commissioner.
• Money transmission security of $100,000, or up to $500,000 for licensees in the variable tier.
• Currency exchange security of $2,500, or the greater of $2,500 or 1 percent of Texas volume, capped at $1 million.
• Coverage for claims for at least five years after the license is surrendered or the business stops.
• Annual report and fee to keep the license from expiring.

Texas Money Services Bond FAQs:

Official and Additional Resources for the Texas Money Services Bond: