What I mean is that this law which is intended to prevent fraud does nothing of the sort. All it does is guarantee that the people who commit fraud were able to pay the bond. What's the point? If they do commit a fraud, they'll probably steal much more than the value of the bond anyways. All this regulation really does is stifle competition, I'd eliminate it altogether.
The risk that the bond mitigates is not that your money transfer enterprise is a criminal conspiracy. It is that you are incompetent. The concern is that after the first or second instance in which you lose a 5-figure sum of money for a client, you'll pack up and leave town.
I think we can agree that's a far more likely scenario than premeditated fraud.
Incidentally: $500k is the floor of the bond value needed. It scales up to $7MM with transaction volume. Personally, I think they should uncap it altogether.
His point is that the bond is too large, and that's _just_ for California. In the linked quora post, it was specifically pointed out that there are 43 other states where one has to do the exact_same_thing where the bonds vary from $10k-$1M.
You don't actually have to pay the $500k. A new business with no history (good or bad) might pay $25k to post a licensing bond.
I don't have anything to say about the 43 other states that want bonds to conduct money transfers in them, but some of the coverage here seems a tad breathless.
tptacek: Perhaps it is breathless, but I think many of us find it interesting. States noticeably absent from Paypal's licenses:
New Mexico,
South Carolina,
Georgia (heavy banking industry),
Rhode Island,
New York (heavy banking industry),
and Nevada (heavy gambling).
I might put together a spreadsheet this evening if I have time.
