Recession Brings New Surety Bond Rules for Debt and Foreclosure Companies


Consumer complaints about debt-assistance companies have spawned tougher new laws designed to crack down on scam artists. In many states, these new laws require companies to carry surety bonds to enable repayment if they abscond with customers’ money. In other cases, recent lawsuits against shady operators may inspire even stricter laws.

Here’s a quick look at several industry niches related to consumer debt where states have recently passed new rules:

Credit counselors: In Louisiana, three out-of-state credit-repair companies were hit with “cease and desist” orders from the state attorney general after failing to post a $100,000 surety bond with the state.

Debt collectors: Effective last July, a new law in New York requires debt collection agencies to post a surety bond worth between $10,000 and $75,000, depending on the company size.

Debt management services: Providers in this niche in Pennsylvania must post a surety bond “greater than the total amount of Pennsylvania consumer funds that the licensee would hold directly or in trust at any time,” a state surety association reports. A 2008 law added the surety-bond requirement.

Foreclosure consultants: A new California law effective last July requires a $100,000 surety bond for foreclosure-consulting companies. Shortly afterwards, California attorney general Jerry Brown ordered 400 companies to post a $100,000 bond or face prosecution.

Mortgage rescue: Four lawsuits were filed against “mortgage rescue” businesses by the Pennsylvania attorney general in November. Among the issues in the suit is that companies billing themselves as “credit-service organizations” needed a surety bond to operate in the state. Also in Maine, three lawsuits were filed against out-of-state businesses providing debt settlement services. The defendant companies lacked the state’s required $50,000 surety bond.

Companies that operate anywhere in the realm of assisting consumers with personal or real-estate debt needs to keep a close eye out for new laws that may require they obtain a bond, or increase the size of their bond. Laws are constantly changing and vary from state to state.

The experts at can help you determine if your surety bond needs have been affected by any recently passed legislation.

Image: Quint Cobb

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About the Author

Carol Tice
Business journalist Carol Tice has written for Entrepreneur Magazine, the Seattle Times, Dun & Bradstreet and many others. She is a frequent contributor to