Play It Safe with Your Money Consumer Protection Series: Play It Safe With Your Money

For more information regarding surety bonds and consumer protection, follow along with our blog as we dive deeper into the types of businesses that should be bonded, why licensed companies and professionals purchase bonds, and more.

Trusting strangers with your hard-earned savings can be a terrifying concept. Understanding the guardrails put in place to protect you and your finances when working with licensed professionals can put your mind at ease.

Many states enforce license and bond requirements to protect consumers from fraud, financial loss, or other breaches of contract as outlined on their specific surety bond forms. States that require bonds for licensing purposes act as the bond’s obligee.

The  bonded professional or company that purchases and files the bond is the principal. If they do not fulfill their obligations, harmed parties can file a claim against the bond seeking reimbursement for damages.

The surety company providing the bond and backing the principal’s obligations is the surety. If a valid claim is made against a bond, the surety will pay damages up to the bond’s full amount.

 The professions outlined below generally require surety bonds as a part of the licensing process to protect consumers. Licenses and bonds must be purchased and filed for each state’s requirements.

Appraisal Management Companies

Appraisal management companies (AMCs) evaluate properties and determine how much they’re worth in the real estate market. The information provided by appraisal management companies facilitates the homebuying process between lenders and borrowers.

Credit Service Organizations

Credit service organizations (CSOs) repair client financials by improving credit scores, extending lines of credit, and possibly avoiding foreclosures or bankruptcies. Credit service organizations also monitor client credit reports for inaccurate information.

Debt Consolidation Businesses

Debt consolidation businesses (DCBs) work with creditors to lower interest rates, reduce monthly payments, and waive penalties to produce a payment schedule that allows clients to pay off debts as soon as possible.

Investment Advisors

Investment advisors provide recommendations and/or security analyses for investment purposes. After evaluating a client’s financial responsibilities, aspirations, and risk tolerance, investment advisors develop strategies to maximize their return on investment.

Why should I verify my financial professionals are bonded?

Surety bonds in the financial industry protect consumers from unethical practices that could adversely affect their financial situation, such as:

  • marketing/providing fraudulent strategies
  • misrepresenting financial situations
  • creating false financial statements
  • requiring large upfront payments or fees
  • failing to provide services as advertised

How do I evaluate financial professionals?

  1. Ask for full transparency about service costs and fees
    Some companies offer services for a flat fee while others charge hourly services or commission on securities. Though fees might seem small, they can add up.
  2. Find reviews from previous clients about their experience
    NerdWallet publishes monthly articles featuring their preferred financial firms. shares consumer reviews, services provided, fees charged, and more.
  3. Verify their credentials
    Ask financial professionals and firms to provide a copy of their license and/or surety bond. Many obligees (state licensing authorities) maintain databases where you can search for licensed and bonded professionals.

How do I protect my finances in the future?

Follow this guide to identify and evaluate financial professionals to ensure those managing your assets have your best interests in mind.

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