Entities providing student loan services in the State of Washington now face new rules to work as a licensed business. As of December 3, 2018, the updated Consumer Loan Act requires Washington student loan businesses to post a $30,000 surety bond as one of the requirements to maintain or receive a license from the Washington State Department of Financial Institutions.
Posting a student loan servicer bond provides a form of protection to both borrowers and the state of Washington in the event of fraudulent business carried out by the lending company. A student loan servicer bond guarantees the business will adhere to laws and other regulations enforced by federal, state, and local levels of government. It also provides a means for financial compensation for borrowers in the event that a lending company does conduct fraudulent business. Purchasing a student loan servicer bond enables companies to legally work within the State of Washington, as required to receive a Washington Consumer Loan License.
How to get a Washington Consumer Loan License
To receive a Washington Consumer Loan License, the individual or entity will need to complete an application and follow the instructions established by the Washington State Department of Financial Institutions. A license is required for any individual or entity serving a loan for students borrowing in the State of Washington for educational purposes. Senate Bill 6029 updated several regulations for student loan services including the requirement of posting a surety bond, as well as an additional regulation for a student loan advocate to be onsite available to answer any questions individuals may have in regards to student loans.
The total license cost for the main headquarters of a loan business is $1,162.21, in addition to a $100 Nationwide Multistate Licensing System and Registry (NMLS) fee. Subsequent branches of the main headquarters will be charged a fee of $584.46, along with an associated $20 Nationwide Multistate Licensing System and Registry fee.
Applicants for a Washington Consumer Loan License must provide the following information to the Washington Department of Financial Institutions:
- Criminal history within the past seven years of all applicants, officers, or principals need to be provided including:
- Gross misdemeanor convictions specifically involving dishonesty or financial misconduct, felony convictions, and violations of banking laws of the State of Washington or the United States
- Information must be provided relating to any adverse actions taken in any states or by the federal government against:
- Any license held by the applicant or its officers or principals to conduct business under the Act, or a similar statute in another state, if the license has been suspended or revoked within the past five years
- applicants, principals, officers, or board directors who have been subject to an injunction or an administrative action issued in connection to the Consumer Loan Act, the Consumer Protection Act, the Mortgage Broker Practices Act, the Insurance Code, or the Securities Act
- Information must be provided to show the applicant, principals, officers, or board directors have the financial responsibility and character to operate the business honestly, fairly, and efficiently, including any information regarding a history of unpaid debts or insolvency
- Applicant must be residents of or have a primary location in the United States
- Applicants must have a minimum net worth as set by WAC 208-620-321
Washington Consumer Loan License Examinations
As part of maintaining a Washington Consumer Loan License, businesses will be subject to routine examinations by the Washington Department of Financial Institutions to ensure all license requirements are being followed. Common reasons business fail the examination include the following:
- Licensees found to be charging fees outside the tolerance limits addressed in Regulation X, 12 CFR Section 1024.7
- Failure to accurately complete loan documents provided to borrowers, as referenced in WAC 208-620-550(8)
- Failure to provide accurate privacy policies. Licensees much ensure all privacy policies provided to borrowers are accurate and complete according to Regulation P, 12 CFR, Subpart A, Section 1016.4
- Terms such as “lowest fees” or best rates” were used in advertisements, which is prohibited by WAC 208-620-630(5)
More information on the routine examinations conducted on Consumer Loan entities, including the questionnaire sent out to candidates prior to an examination, can be found here.
Need a surety bond to become a licensed Washington Consumer Loan Business?
The experts at SuretyBonds.com have years of experience issuing surety bonds for loan servicers nationwide, meaning they know what it takes to get you approved for the bond you need quickly and easily. For a free, no obligation quote on your surety bond, visit SuretyBonds.com or call today at 1 (800) 308-4358.