Collection Agency Bond

Collection agencies play a crucial role in recovering debts and managing sensitive financial information. To ensure ethical practices within this industry, many states require collection agencies to obtain collection agency bonds, also known as debt collector bonds.

Collection agencies specialize in recovering unpaid debts on behalf of creditors. They handle sensitive information and financial data while assisting clients in collecting outstanding payments. Due to the nature of their work, collection agencies are considered high-risk businesses.

Collection agency bonds are a specific type of surety bond required by many states to regulate collection agencies. These bonds ensure that collection agencies adhere to state laws and industry regulations when collecting debts. The bond acts as a form of protection for both the state's citizens and the clients of collection agencies, guaranteeing that funds are handled ethically and directed to the appropriate entities.

If a collection agency fails to comply with regulations, misappropriates funds, or engages in unethical practices, the obligee can file a claim against the bond. In such cases, the surety company must pay reparation to the claimant, after which it will seek reimbursement from the collection agency. These bonds act as a safeguard, promoting ethical practices within the collection industry.

Quick Overview

Bond Amounts:

  • Bond amounts for collection agencies vary by state, ranging from $1,500 (Idaho) to $60,000 (Nevada, based on the number of solicitors).


  • 1-9% of the bond amount per year
  • This rate is largely determined by your credit score.
Collection Agency Bond (TN)
Collection Agency Bond (TN)

State Information

The table below depicts the states with a bond requirement:

State Bond Amount 
Alaska  $5,000 bond
Arizona $10,000- $35,000 | based on gross annual income
Arkansas $10,000- $25,000 | based on number of solicitors
Colorado $12,000- $20,000 | based on gross annual income
Connecticut $25,000 bond
Florida $50,000 bond
Hawaii $25,000 bond
Idaho $1,500 bond
Illinois $25,000 bond
Indiana $5,000 bond
Maine $20,000 bond
Maryland $5,000 bond
Massachusetts $25,000 bond
Michigan $5,000 bond
Minnesota  $50,000 bond
Nebraska $5,000- $15,000 bond
Nevada $35,000- $60,000 bond | based on number of solicitors
New Jersey $5,000 bond
New Mexico  $5,000 bond
Buffalo, NY $5,000 bond
North Carolina $20,000 bond
Oregon $10,000 bond
Tennessee  $15,000- $25,000 | based on number of solicitors
Texas $10,000 bond
Utah $10,000 bond
Washington $5,000 bond
West Virginia $5,000 bond
Wisconsin $25,000- $35,000 | based on records 
Wyoming $10,000 bond


Collection Agency Bond FAQs

What to look for in a collection agency bond?

When considering a collection agency bond, it's essential to keep an eye out for specific elements to ensure a successful application and avoid rejection. A collection agency bond should include:

Bond Amount: Verify that the bond specifies the correct amount required by your state. The bond amount serves as financial protection in case of any violations or non-compliance with regulations.

Obligee: Double-check that the obligee listed on the bond is the appropriate government entity that mandates collection agencies to obtain this bond. This entity will be the beneficiary in case of a bond claim.

Principal: Ensure that your collection agency is correctly identified as the principal on the bond. The principal is the party responsible for purchasing and maintaining the bond.

Surety: The company that issues the bond.

Having these elements accurately represented in your bond application is crucial to prevent any potential issues, ensuring your compliance with regulatory requirements, and minimizing the risk of rejection or denial.

What factors influence the cost of Collection Agency Bonds?

Several factors influence the cost of Collection agency bonds:

  • Bond Amount: the base bond amount required for each state varies from $1,500 (Idaho) to $60,000 (Nevada). The cost is a percentage of the actual bond amount (1-9%), so you won’t have to pay the bond in full.
  • Credit Score: The applicant’s credit score plays a significant role in determining the premium rate. The premium rate is what you will pay every year, specifically the percentage of the bond amount.  
  • Business Specifics: The health of your business plays a role in determining your premium rate, as it is considered a risk factor. Additionally, in states like Arkansas, the bond amounts are influenced by the number of solicitors associated with the collection agency.

Why does the collection agency bond exist?

The collection agency bond exists primarily to protect the interests of consumers and clients of collection agencies while also ensuring that they follow industry regulations and ethical standards. Collection agencies are trusted with sensitive information and are reponsible for collecting outstanding debts on behalf of their clients, which are usually financial institutions and businesses. Given the financial and ethical implications of this type of business, bonds act as a safeguard against potential misconduct and financial mishandling.

It is required by state governments, who set the regulations for the bond amounts. If, for example, an agency mishandles funds they receive, the government department (the obligee) in charge of collection agency bonds, will file a claim to seek reimbursement, which is done through the bond in place.  

What is a collection agency?

A collection agency is a business that specializes in collecting outstanding debts on behalf of creditors. Collection agencies are hired by creditors such as banks, financial institutions, healthcare providers, or other businesses, to recover unpaid debts. They are responsible for pursuing individuals or entities who owe money to encourage them to pay their debts.

Collection agencies play an essential role in the financial world because they help creditors recover funds that otherwise would go unpaid. They communicate with people who owe money by phone calls, letters, and electronic correspondences such as email. This is what we mean when we refer to collection agencies having “sensitive information.” This can make them high risk because they handle this sensitive information. A collection agency bond protects the interests of all parties involved.