There are thousands of license, permit and miscellaneous bond requirements nationwide.  These bonds are mandated by various federal, state, city and local municipalities.  In order for an individual or business to perform a particular activity, occupation or obtain a professional designation, they may be required to post a bond for issuance of a license or permit. License bonds protect the governing agency and the general public against wrong doing by the bonded individual or entity. They ensure the principal to the bond will comply with all applicable laws and regulations governing the designation or activity in which they are engaged. Acts of fraud, misrepresentation and theft are typical actions where monetary claims can be made against the bond. Examples of the most common license and permit bonds are as follows:

• Appraisal Management Bond – An appraisal management company (AMC) is defined as an independent entity through which mortgage lenders order residential real estate valuation services for properties on which they are considering extending loans.  Most States have implemented either regulations and/or licensing procedures for Appraisal Management Companies.  Upwards of 18 States require an Appraisal Management Company surety bond in conjunction with a license certification.

• Auction/Auctioneer Bond – An auction company or auctioneer is person or company engaged in managing an auction, or a public sale at which people can bid on items.  Most auctioneers act as a 3rd party to a monetary transaction.  Auction company or auctioneer bonds are required in 41 states in order to obtain a license.  The bond is mandated to protect the State and general public against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the auctioneer complies with all State regulations and licensing requirements.

• Auto Dealer Bonds – A surety bond required in most States as a means of becoming and maintaining an auto dealer license.  Surety bonds are commonly required by new and used vehicle dealers, motorcycle dealers, ATV and all terrain dealers as well as dealers of mobile homes.  47 states require auto dealer bonds prior to the issuance of a license.

• Check Casher Bond – A check casher is defined as a person or business who cashes checks with a face value of $1,000 or greater.  12 states require a check casher bond in order for the person or entity to be issued or maintain a check casher license.  The bond is mandated to protect the State and general public against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the check casher complies with all State regulations and licensing requirements.

• Collection Agency Bond – A collection agency is also known as a debt collector.  It is an individual or entity that pursues the collection/payment of debts owed by individuals or businesses for a fee or a percentage of the total amount owed.  32 states mandate collection agency bonds prior to the issuance of a collection agency or a debt collector license.  Because collection agencies act as a third party to a monetary transaction, the bond is mandated to protect the general public against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the collection agency complies with all State regulations and licensing requirements.

• Contractor’s License Bond – A surety bond requirement for a contractor to become licensed.  35 states currently require contractor’s license bonds prior to the issuance and/or the maintenance of a license.  Some States only require a bond if the amount of work performed in the state exceeds a certain value.  Contractor’s license bonds provide protection if the contractor fails to complete a job or fails to meet other financial obligations such as paying subcontractors and suppliers.

• DMV Bond – DMV is an abbreviation for Department of Motor Vehicles.  In most States, this governing agency is responsible for vehicle registration, drivers licensing and other occupational licensing.  Most DMV’s require various surety bonds.  Examples of DMV required bonds are new and used auto dealer bonds, certificate of title bonds, registration services bonds, business partner automation bonds, traffic school violator bonds, commercial requester account bonds engine/vehicle verifier bonds and wholesale dealer bonds.

• Escrow Licensee Bond – Escrow Licensee’s are considered a fiduciary in the transfer of property or money from one party to another.  Surety bonds are required in most States prior to the issuance or the maintenance of a license.  Because escrow licensee’s act as a third party to a monetary transaction, the bond is mandated to protect against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the escrow licensee will comply with all State regulations and licensing requirements.

• Finance Lender Bond – A surety bond required in nearly all States to secure or maintain a finance lender, mortgage broker, mortgage originator or supervised lender license.  The bond is mandated to protect against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the Principal will comply with all State regulations and licensing requirements.

• Insurance Broker Bond – A surety bond required in most States which protects customers against illegal or unethical acts on behalf of an insurance broker/agent.

• Medicare/DMEPOS/ Durable Medical Equipment, Prosthetics, Orthotics or Supplies Bond – Most suppliers of medical equipment, prosthetics, orthotics and other medical supplies are required to post a $50,000 bond with the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services.  The DMEPOS bond must be on file prior to their ability to bill Medicare.  These bonds are also termed Medicare or Medicaid bonds.

• Money Transmitter Bonds – A money transmitter or money transfer service is a business entity that provides money transfer or payment services.  48 States require money transmitter bonds at ranging amounts between $25,000 and $1 million.  The bond is mandated to protect against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the Principal will comply with all State regulations and licensing requirements.

• Mortgage Broker Bond – A surety bond required in nearly all States to secure or maintain a finance lender, mortgage broker, mortgage originator or supervised lender license.  The bond is mandated to protect against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the Principal will comply with all State regulations and licensing requirements.

• Notary Public Bonds – A public official surety bond required by many States to protect against losses to the public resulting from the improper actions, misconduct or mistakes made by a notary public.  Notary bonds do not cover errors or omissions made by the notary.

• Process Server Bond – A process server is a person authorized by law to serve legal documents such as subpoenas, writs or warrants, particularly those which require a court appearance.  Most States or Counties require the posting of a process server bond prior to granting a process server designation.

• Public Adjuster Bond – A public adjuster is a professional claims handler who advocates for the policyholder in appraising an insurance claim.   Several States require a public adjuster bond prior to the issuance of a license.

• Public Official Bonds – A public official is a person who holds a position of official authority that is conferred by a State, City, County or other municipality.  They often hold a legislative, administrative or judicial position of sorts and is either elected or appointed.  Relative to surety bonds, notaries public are the most common public official.   A public official bond which provides indemnity for failure of a public official to faithfully perform their duties while properly managing funds they might oversee for the term of their designation.

• Sporting Permit Bond – Promoters or organizers for boxing, wrestling, MMA, karate or other contact sporting events are often required to post a sporting permit bond.  The bond serves as a guarantee that the promoter will uphold its promises and obligations.  The bond is mandated to protect against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the Principal will comply with all State regulations and licensing requirements.

• Surplus Lines Broker Bonds – A surplus lines broker is licensed to place coverage with non-admitted insurers which are not licensed to transact business in a particular State.  Surety bonds are required in most States prior to the issuance of a surplus lines broker license.

• Tax Preparer Bond – A tax preparer bond is required in the State of California, Tax Education Council (CTEC) in the amount of $5,000 in order to become a registered preparer of tax returns.  The bond ensures the tax preparer will ethically perform their duties and serves to protect against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the Principal will comply with all State regulations and licensing requirements.

• Telemarketing  Bond – Also known as a phone solicitor bond,  there have been a growing number of States implementing regulations over the telemarketing industry.  Often, telemarketing bonds are required to ensure that they abide by the laws and licensing regulations set forth in each State.  In addition, the bond guarantees that the telemarketer will perform their duties and ethically handle the personal information they obtain from their clients.

• Title Agency Bond – A title agency is an independent agency that can use and prepare title related documents for outside parties without bias.  Surety bonds are required in many States prior to the issuance of a license.  The bond is mandated to protect against acts of dishonesty, fraud, theft or malfeasance.  In addition, the bond serves to ensure that the Principal will comply with all State regulations and licensing requirements.

• Used Auto Dealer Bonds – A surety bond required in most States as a means of becoming and maintaining an auto dealer license.  Surety bonds are commonly required by new and used vehicle dealers, motorcycle dealers, ATV and all terrain dealers as well as dealers of mobile homes.  47 states require auto dealer bonds prior to the issuance of a license.

Bonds which are unique in purpose and do not fall into a specific surety or fidelity bond category are generally called miscellaneous bonds. Some examples of miscellaneous commercial bonds include, but are not limited to, stop notice bonds, ARC bonds, financial guarantee bonds, appeal bonds, auto dealer bonds, broker bonds, ERISA bonds, mortgage lender bonds, title agency bonds, and many more.

There are several surety bonds which cannot be classified under license and permit bonds.  The following is a list of common miscellaneous bond requirements:

• Car Wash Bond – A car wash bond is also known as a car wash employers’ bond which required by the State of California in the amount of $150,000.   The car wash bond requirement was increased from $15,000 to $150,000 in 2014 after the passing of Senate Bill AB 1387.  The bond ensures the ethical employment practices of the car wash pertaining to wages, hours, working conditions as set forth by the California Department of Labor Standards.  Car washes which have entered into a collective bargaining agreement/unionized are not required to post the $150,000 car wash facility bond.

• Certificate of Title Bond – Also known as a defective title bond or bonded title, is a document that proves a person’s ownership of a motor vehicle or vessel.  The bond allows the vehicle owner to obtain a new certificate of title should the original have become lost as well as sell, insure or register the vehicle.  The certificate of title bond covers monetary damages should the bond not be issued to a proper vehicle owner.

• Commercial Fundraiser Bond – A commercial fundraiser is defined as any entity that directly or indirectly solicits or receives contributions for or on behalf of any charitable organization for compensation. Most states require every charitable fundraiser to register with the state, as well as post a commercial fundraiser bond.

• Employee Retirement Income Security Act (ERISA) Bond – ERISA, is a federal law passed in 1974 which mandates minimum standards for most voluntarily established pension plans. ERISA was enacted to protect employee benefit plans against loss by acts of fraud or dishonesty.  The statute instituted the requirement for persons overseeing plan funds to be covered under an ERISA bond.  An ERISA bond is categorized as a fidelity bond and the required penal sum of the bond is generally 10% of the plan’s assets.  Non-traditional or non-qualifying assets are required to be bonded at 100% of their value.

• Fidelity Bond – A surety bond protecting against losses sustained by dishonest acts, embezzlement or theft by employees.  Fidelity bonds are typically provided as blanket coverage applying to all employees however, individual employee dishonesty bonds are also available.

• Financial Guarantee Bond – A financial guarantee is a surety bond ensuring that an individual or entity will be paid in compliance with a contractual obligation.  The guarantee provides investors with an additional level of comfort that the investment will be repaid in the event that the securities issuer would not be able to fulfill the contractual obligation to make timely payments.

• Lost Instrument Bond – A surety bond required when a financial instrument such as a stock certificate, cashier’s check or mortgage note has become lost, stolen, destroyed or may not otherwise be reconveyed.  The bond allows for the instrument to be re-issued or reconveyed.  The bond protects against any liability that might arise should the instrument be issued in error.

• Sales Tax Bond – A sales tax bond is considered a financial guarantee bond.  It ensures that an individual or entity will pay all taxes owed.  In many cases, it is mandated by a County or State of retailers.

• Wage and Welfare Bond – A wage and welfare bond is required to guarantee the payment of union dues.  As a result, they are considered financial guarantee bonds. Pinnacle Surety specializes in License, Permit, and Miscellaneous bonds nationwide.

 

For additional information regarding bonds, please contact an expert at Pinnacle Surety.