Texas Debt Collection (Agency) Bonds

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Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all your Texas debt collection bond needs.

What Are They?

In Texas, third-party collection agencies are not required to be licensed, but they are required to purchase a Texas debt collection surety bond (also known as a Texas collection agency bond) in order to operate legally within the state. This type of bond serves two important purposes:

  • To ensure that collection agencies comply with all applicable state laws and regulations.
  • To provide a source of funds to compensate collection agency clients who are harmed financially by the unlawful or unethical actions of collection agencies.

The required bond amount is $10,000. That is the maximum amount available for paying claims.

Who Needs Them?

All third-party collection agencies operating in the state of Texas must obtain the required $10,000 bond. A third-party collection agency contracts with creditors to collect money owed to those creditors by debtors. The collection agency is paid a fee for providing this service.

Speak with a Surety Bond Professionals agent today to discuss your bonding needs.

How Do They Work?

The three parties to a Texas debt collection surety bond agreement are:

  • The Texas Secretary of State (the “obligee”) requiring the bond.
  • The collection agency owner (the “principal”) required to purchase the bond.
  • The bonding company (the “surety”) that underwrites and approves the bond.

In issuing a $10,000 Texas debt collection bond, the surety is agreeing to extend up to $10,000 in credit to the principal to pay valid claims against the bond.

If the principal commits an illegal or unethical act that causes a client financial harm (for example, not turning over money collected from debtors), the client can file a claim against the principal’s Texas debt collection bond. If the surety finds that the claim is valid and is unable to negotiate an amicable settlement, the surety will go ahead and pay the claim on behalf of the principal.

In making that payment, the surety is extending credit to the principal, which creates a debt that the principal is legally obligated to repay. The terms of the surety bond agreement indemnify the surety against any responsibility for paying claims.

What Do They Cost?

As is the case with most surety bonds, the annual premium cost for a Texas debt collection bond is a small percentage of the required bond amount. The surety establishes that percentage, the premium rate, based on the risk they take on in agreeing to extend credit to the principal for the purpose of paying claims. The best measures of that risk are the principal’s personal credit score, business finances, and liquid assets.

With good credit, the principal typically pays an annual premium that’s in the range of 1% to 3% of the required $10,000 bond amount. Those with poor credit may still be able to purchase a Texas debt collection bond but may pay a higher premium.

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Our surety bond professionals will get you the Texas debt collection bond you need at a competitive rate.