License bonds are surety bonds filed with a license to help protect the public. All different types of businesses are required to file license bonds: mortgage brokers, car dealers, contractors, etc. The one thing that they all have in common is that they typically deal directly with the citizens the bond is in place to protect. As a bond producer, I know many of the requirements for a variety of different businesses. I also see first hand when the state fails to properly protect the public by not requiring a bond, or by not requiring large enough of a bond.
I am always pleased to see a government official take action to set a new bond requirement. My satisfaction does not only come from the potential to write more business, but because I know that it is for the public good. How many times have you heard about someone getting a raw deal when buying a car, a home, getting improvements made on a home, etc. It is the government’s job to help protect it’s citizens from harm, including financial loss. A bond guarantees the work of the licensee and will pay out to their clients in the event of a legitimate claim. If a state is going to issue a license to legally operate a business they better make sure there is some sort of financial guarantee to protect the public from fraudulent acts.
You can always visit the Surety Bond Forums: Surety News section for updates on bond requirements across the country. There are a few recent proposals to mention, hopefully other state representatives will follow their lead. Colorado is proposing a $100,000 license bond requirement for mortgage brokers operating in the state. Georgia is considering an increase from $25,000 to $50,000 for their current auto dealer bond requirement. Smaller towns are also taking action to protect their citizens. Asbury Park, NJ is proposing a surety bond to be filed with remodeling contractors licenses.
Many license bond requirements are just too small. As mentioned above, Georgia has recognized their small requirement and are trying to take action. If there is a fraudulent auto dealer, do you think he/she will be crooked on just one auto sale or multiple? How much do you think the average vehicle costs these days? There are many citizens getting hit with large financial losses with a bond requirement of only $25,000. Of coarse the people fighting the act would be the auto dealers. They complain the requirement would put many smaller shops out of business. However, I believe that a bond to protect the public is simply the cost of doing business in that state. If an increased bond amount is going to put you out of business, then you probably would not have been operating for much longer anyhow. Statistically, the business owners that are more financially desperate are also the ones more likely to trigger claims.
License surety bonds are a great instrument to help protect the public from fraud. Our representatives need to wake up and create the requirements where they are lacking and increase the requirements when too small. Their job is to protect the public and a bond requirement is the best way to go about doing so. There will be people opposing new requirements/increases, but that is a cost of business to operate. If you can’t afford to bond your clients, then perhaps you should no longer be in business.