Credit Services Organization Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about credit services organization bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond agents.

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FREE CREDIT SERVICES ORGANIZATION BONDS QUOTE

What Are Credit Services Organization Bonds?

Nearly every state has enacted legislation governing the licensing and conduct of credit services organizations (CSOs). These are companies that provide certain credit-related services to consumers, such as getting incorrect information expunged from credit reports to improve their credit scores, helping them obtain credit, and so on. They charge consumers a fee for their services and are subject to the Credit Repair Organizations Act, which is part of the federal Consumer Credit Protection Act of 1968.

A CSO bond is the CSO’s pledge to operate in compliance with all applicable laws. When a violation occurs, such as promising unrealistic credit score improvements, and the consumer suffers financial harm as a result, the injured party has the right to file a claim for damages against the CSO bond and be compensated.

Who Needs Them?

Purchasing a CSO bond is a mandatory step in the licensing of CSOs in most states.  The required bond amount varies by state. There must be an active CSO bond in force at all times to prevent revocation of the CSO’s license to operate.

How Do They Work?

A CSO bond surety bond agreement is a legally binding contract that brings together three parties: an “obligee,” a “principal,” and a “surety.”

  • The state, the party requiring the bond, is the obligee,
  • The CSO owner, the party required to purchase the bond, is the principal, and
  • The company guaranteeing the bond is the surety.

What the surety is really guaranteeing is the principal’s payment of all valid claims against the bond. When a claim is received, the surety will investigate to make sure it’s legitimate, and will usually pay it on behalf of the principal to expedite resolution of the matter. But the legal obligation to pay claims belongs solely to the principal, so the principal must then repay the surety. The surety has the option of taking legal action against the surety if not reimbursed within a reasonable period of time.

What Do They Cost?

The surety sets the premium rate for each CSO based on an underwriting assessment of the risk that the principal won’t readily repay the surety, as indicated by the principal’s personal credit score. A high credit score shows that the principal has a history of managing credit well, so the risk to the surety is low. Therefore, the principal deserves a low premium rate, typically in the range of one to three percent.

Poor credit means that the risk to the surety is higher, which warrants a higher premium rate, potentially in the ten to fifteen percent range.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about credit services organization bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond agents.

CONTACT US FOR A

FREE QUOTE

What Are Credit Services Organization Bonds?

Nearly every state has enacted legislation governing the licensing and conduct of credit services organizations (CSOs). These are companies that provide certain credit-related service to consumers, such as getting incorrect information expunged from credit reports to improve their credit scores, helping them obtain credit, and so on. They charge consumers a fee for their services and are subject to the Credit Repair Organizations Act, which is part of the federal Consumer Credit Protection Act of 1968.

A CSO bond is the CSO’s pledge to operate in compliance with all applicable laws. When a violation occurs, such as promising unrealistic credit score improvements, and the consumer suffers financial harm as a result, the injured party has the right to file a claim for damages against the CSO bond and be compensated.

Purchasing a CSO bond is a mandatory step in the licensing of CSOs in most states.  The required bond amount varies by state. There must be an active CSO bond in force at all times to prevent revocation of the CSO’s license to operate.

A CSO bond surety bond agreement is a legally binding contract that brings together three parties: an “obligee,” a “principal,” and a “surety.”

  • The state, the party requiring the bond, is the obligee,
  • The CSO owner, the party required to purchase the bond, is the principal, and
  • The company guaranteeing the bond is the surety.

What the surety is really guaranteeing is the principal’s payment of all valid claims against the bond. When a claim is received, the surety will investigate to make sure it’s legitimate, and will usually pay it on behalf of the principal to expedite resolution of the matter. But the legal obligation to pay claims belongs solely to the principal, so the principal must then repay the surety. The surety has the option of taking legal action against the surety if not reimbursed within a reasonable period of time.

The surety sets the premium rate for each CSO based on an underwriting assessment of the risk that the principal won’t readily repay the surety, as indicated by the principal’s personal credit score. A high credit score shows that the principal has a history of managing credit well, so the risk to the surety is low. Therefore, the principal deserves a low premium rate, typically in the range of one to three percent.

Poor credit means that the risk to the surety is higher, which warrants a higher premium rate, potentially in the ten to fifteen percent range.

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