Date Published: April 24, 2013

Money transmitters are any business entity that provides money transfer services or payment instruments. Currently 48 states require money transmitters to be licensed and many of the states license requirements include a surety bond.  Nebraska is the latest state to add a surety bond requirement.

Nebraska LB 964 requires money transmitters to be licensed and post a surety bond in an amount equal to $100,000, plus $5,000 for each additional authorized delegate or location where the licensee will sell and issue payment instruments or engage in money transmission in the State.  The bill would cap the bond amount at $250,000.  The Director of Banking and Finance (Director) may increase a licensee’s bond amount up to the $250,000 maximum for good cause.  The Director also could require a new or supplemental bond if the original license bond is exhausted or inadequate.  The new or supplemental bond shall not exceed $500,000.  The bond secures the licensee’s faithful performance of his or her obligations as a money transmitter.  Direct actions on the bond are permitted and the aggregate liability of the surety cannot exceed the principal sum of the bond.  The bond can be cancelled with 30 days’ notice.  The bond must remain in place for five years after the money transmitter ceases operations in the state.  The bond could be reduced, eliminated, or substituted prior to the end of the five-year period.  Alternative forms of security can be accepted in lieu of the bond.

This is a big bond and the surety bond companies will require full financial disclosure as part of the underwriting process.  While companies that act as money transmitters may believe the easiest way to obtain this bond si through its insurance agent, nothing could be further from the truth.  A Surety bond of this size will be a lot easier to place if a professional surety bond agency places the bond.  Most insurance agents at best, have a cursory knowledge of the surety bond product.  A surety bond only agency can offer invaluable guidance in obtaining the bond at the best possible price.

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