Residents of the State of Texas retain special consumer protections during the debt collection process. Once such unique protection not covered under Federal credit protection laws is the requirement that all third party debt collection agencies in Texas maintain active insurance via a surety bond.
This law was instituted because the State of Texas wanted to protect consumers from unscrupulous debt collection methods and prevent inaccurately reported information from appearing on credit bureau reports. Under these laws, an alleged debtor who is a resident of Texas has the right to pursue monetary civil remedies against a third party debt collector’s surety bond.
What Texas State Law requires that third party debt collectors maintain insurance?
Texas Finance Code Section 392.101 requires that “a third-party debt collector or credit bureau may not engage in debt collection unless the third-party debt collector or credit bureau has obtained a surety bond issued by a surety company authorized to do business in this state as prescribed by this section. A copy of the bond must be filed with the secretary of state.”
What exactly is a Surety Bond?
A third party debt collector essentially obtains insurance from a surety company in the form of a bond, so that if the collector violates Texas debt collection law, they can be held financially accountable.
Because most debt collectors operate outside of the State of Texas, the state’s Attorney General has no jurisdiction to pursue criminal action. Pursuing civil actions for Texas Residents would be a burdensome and difficult process, as it would need to be done in the home state of the debt collector, through that particular state’s court system.
Thus, a surety bond valued at $10,000 is required for all debt collectors operating in Texas.
If the company fails to follow Texas Law, victims seeking monetary damages for debt collection violations can pursue the Surety Bond company in a state court of law.
Does a debt collector based in Texas also have to maintain an active surety bond?
Yes. All third party debt collection agencies must maintain an active surety bond with a surety company authorized to do business in the State of Texas.
How can I find out if the debt collector that has contacted me has an active surety bond in Texas?
The Texas Secratary of State maintains a Debt Collector Search that lists all debt collectors who have ever applied for a surety bond.
It also lists the date the surety bond was issued, the current status of the bond, the name of the surety company, and the surety bond number.
You can perform a search to determine if a debt collector has a surety bond by visiting the following link at the Secratary of State’s web site:
You can find a list of authorized surety companies by visiting this link:
The debt collection company that has contacted me does not have a surety bond, or their surety bond is no longer active. What do I do next?
If you have confirmed that the debt collector that has contacted you does not have an active surety bond, then they are illegally attempting to collect debt in Texas.
You can immediately take action to remove this listing from credit bureaus and cease future collection attempts for this debt.
Step 1: You must request a debt validation from the collection agency. This is a request for evidence that the debt is legitimate and that it is being collected lawfully. In this debt validation request, you must request proof of an active Texas surety bond.
Step 2: If the company fails to provide a satisfactory response to your debt validation, you can move to cease collections. Within this step you may also advise the debt collection agency that you intend to file a complaint with the Texas Attorney General if they fail to comply with your request. While the collection company may escape Texas civil penalties in this particular case, their violation may impede their ability to collect debt in Texas in the future because of a denied surety bond application, costing their business untold revenue.
Step 3: Have related collection accounts removed from all major credit bureaus. Because the debt collector is out of state and does not maintain an active bond the credit bureaus must comply with your deletion requests, as they themselves must be bonded to do business in the State of Texas.