Collection Agency Bonds
What is a Collection Agency Bond?
Most states require collection agencies to get bonded before they can receive their business licenses. These bonds work as do other surety types: by ensuring that professionals do their jobs according to industry regulations. Collection agencies are expected to uphold the terms of their bonds, which vary depending on the legal language each state uses for its form.
Generally speaking, these bonds require collection agencies to appropriately handle the money they receive when pursuing outstanding debts. They also require that these funds be routed to the company with the debt outstanding (less any agreed-upon collection fees, which can total as much as 30 percent).
Each surety bond that’s issued functions as a legally binding contract that involves three parties:
- The principal is the collection agent or agency that purchases the bond.
- The obligee is the government agency that requires the bond.
- The surety is the insurance company that issues the bond.
If a collection agency does misappropriate funds, the obligee can seek reimbursement by filing a claim on the agency’s bond. If the claim is determined to be valid, the surety must pay reparation up the bond’s full amount. The surety will then require reimbursement from the collection agency.
If you need a Collection Agency bond download our application to get started: