Given the increasingly unstable state of the economy, it’s no wonder so many instances of fraud and malpractice have emerged from the finance industry’s woodwork.

Fortunately,  government agencies frequently mandate the use of surety bonds to regulate those who have access to others’ finances. A such, the successful implementation of these risk mitigation tools can reassure consumers that finance professionals follow the industry’s laws.

• Mortgage broker bonds protect homeowners against against mortgage professionals who use dishonest lending practices.
• Tax collector bonds can cover liability in the case of uncollected taxes.
• Collection agency bonds keep debt collectors from infringing on consumers’ rights.
• Patient trusts bonds guarantee that nursing homes and other long-term care facilities manage patients’ finances lawfully.

Regardless of the specific type, these surety bonds provide consumers with financial guarantees through which they can recover losses resulting from the negligence of unethical professionals.

In addition to providing an avenue through which consumes can gain compensation, surety bond regulations also function as a barrier to entry. They do so by keeping unqualified individuals from accessing positions through which they could potentially take advantage of consumers. Those with low credit scores, poor financial credentials or problematic work histories might not qualify for surety bonds at an affordable rate. An inability to become bonded when required by law keeps individuals from being licensed.

Furthermore, failing to maintain a surety bond as required by law can result in fines, legal action and even license revocation for the professional. This in and of itself typically exemplifies just how much government agencies value  surety bond protection.

Last year New Jersey’s Essex County Office of Small Business Development partnered with The Surety & Fidelity Association of America to provide a free surety bond program to women and minority business owners in the area. The next installment of the program, called the Essex County Bonding Readiness Program, will kick off on April 14.

The program was founded in 2010 to give women and minority small business owners a fair opportunity to compete for contracts. By taking part in the program, women and minority business owners gain access to information and resources that can help them get a surety bond or bond line, as well as increase their current bonding limit.

On the county’s website, Essex County Executive Joseph N. DiVincenzo  says:

“The Bonding Readiness Program is a unique opportunity for vendors to enhance their knowledge of the government procurement process and network with financial and lending institutions that can help them grow their businesses. We are proud of what has been accomplished during the first year of the program and look forward to building on our success.”

The program lasts for eight weeks and offers one-on-one counseling sessions with surety bond professionals.

According to the program’s website, ideal candidates should have:

• minimum of two years business experience
• financial records covering profit and loss
• history of successful project experience
• commitment to complete the program

To register for the next installment of the program that starts on April 14, qualified business owners can call 973-621-5420 or e-mail bondingreadiness@essexnj.org.

The National Association of Surety Bond Producers (NASBP) has released the industry’s first online continuing education course. The course, called “Commercial Surety Fundamentals,” centers around license and permit, court, fiduciary, public official and miscellaneous bonds.

NASPB created the course because surety providers generally make higher commissions on commercial bonds than on contract bonds.

According to the NASBP website,

“The National Association of Surety Bonds Producers (NASPB) has partnered with WebCE, a leading nationwide provider of Continuing Education for insurance professionals to provide an online Commercial Surety Fundamentals course. CE credits have been applied for in all states an will be available as they are approved. The sane course is also available as a non-CE training course.”

So far most of states have determined that the course content fulfills the continuing education requirement for licensed surety providers. Hours required for licensing vary by state, from five hours for a Washington surety bond license to 10 hours for a Texas surety bond license. Official approval is still pending in a few states.

The course costs $189 and consists of four separate chapters:

1. Commercial Surety Fundamentals
2. Evaluating Risk and Exposure
3. Underwriting the Principal
4. Professional Bond Agency Responsibilities

NASBP and WebCE designed the course so that surety bond professionals could work at their own pace. Individuals have a full calendar year to complete the course, which includes passing a comprehensive exam.

Those interested in taking the course can register on the NASPB website.

Janitorial and cleaning companies have to place a significant amount of trust in their employees.

Business owners send their workers into all manner of businesses and homes. Janitorial company employees may be scrubbing an office complex in the wee hours or cleaning residential sites during the work day. No matter the locale, business owners have to protect themselves and their customers from potentially illicit or illegal activities conducted by their employees.

That protection typically comes in the form of a Janitorial Services Bond.

These ultra-specific surety bonds insulate business owners from financial harm in the face of employee dishonesty or theft. They also give consumers an avenue of financial recourse if they can prove in court that their property was stolen.

How to Obtain These Bonds
These are among the simplest bonds for businesses to secure. Companies can get coverage amounts varying from $5,000 to $100,000. Sureties can issue the bond for a single year or up to three years. Most standard applications can be processed within a day.

In terms of surety bond cost, janitorial service bonds provide a great deal of coverage at a minimum cost. A $5,000 bond that covers no more than five employees can be obtained for as little as $100 per year in bond premiums. A $100,000 bond for up to 20 employees may cost qualified applicants around $650 annually.

Image: Robert S. Donovan

States are trying to make it tougher for landscape contractors and landscape architects to take homeowners’ money and leave them with half-finished projects by toughening up their surety-bond laws. On Jan. 1 this year, the state of Oregon updated its landscaping contractor law, which now requires bonds ranging from $3,000 for jobs costing $10,000 or less, rising up to a maximum of $15,000 for jobs over $25,000.

North Carolina revamped its landscape contractor law a year ago, and now requires a minimum $10,000 bond.

The State of California goes even further than these states, advising homeowners to ask landscape contractors to take out a bond for the full amount of their job.

With state laws changing, it can be confusing to determine the size bond a landscape contractor is required to obtain for a particular project. The experts at SuretyBonds are ready to help.

Photo via Flickr user David Boyle

The state of Louisiana is cracking down on so-called “credit repair” companies.

Three out-of-state companies recently received cease and desist orders from the state Attorney General’s Office. The state claims that these repair firms lacked the proper registration and licensing to operate. The companies named were Caravan Credit Repair Services of Houston, Texas, and Clean Credit and Kleen Credit of Tulsa, Oklahoma.

The firms were advertising their services in and around Baton Rouge and Lafayette, according to state officials.

Louisiana law mandates that all credit repair businesses register with the state Attorney General’s office and post a $100,000 surety bond.

In general, consumers should exercise caution and due diligence when dealing with credit repair companies. This industry is rife with scams and fraudulent firms. The Federal Trade Commission offers the following tips to help consumers recognize a credit repair scam:

• Companies that want you to pay for credit repair services before they provide any services.

• Companies that do not tell you your legal rights and what you can do for yourself for free.

• Companies that recommend that you not contact a credit reporting company directly.

• Companies that suggest that you try to invent a “new” credit identity, then order a new credit report, by applying for an Employer Identification Number to use instead of your Social Security number.

If you have concerns or questions regarding a credit repair company, contact the Better Business Bureau or your state’s Attorney General’s Office.

Make sure to do your homework and be sure that a company does, indeed, possess the required license and surety bond before you move forward.

Image: Andres Rueda

Aimed at protecting consumers, the Texas legislature recently passed new legislation governing mortgage originators. The law was signed into effect by Gov. Rick Perry on June 19 and took effect immediately.

In short, the law mandates that all mortgage originators in Texas possess up-to-date and complete licenses. They must also hold a surety bond or pay toward a fund that covers reimbursement in the event of default, bankruptcy or another financial collapse.

Dubbed the “Secure and Fair Enforcement for Mortgage Licensing Act,” the legislation seeks to ensure the mortgage lending industry is operating without unfair, deceptive, or fraudulent practices by mortgage loan originators.

Strangely enough, it may have some interesting impacts on RV and motor home dealers. The law features new language and requirements for those selling motor vehicles as a primary dwelling unit.

To learn more or read House Bill 10 in full, click here.

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Time is winding down for medical equipment suppliers and other industry figures to comply with new surety bonding regulations.

Starting Oct. 1, manufacturers and suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) will have to obtain a $50,000 Medicare surety bond in order to conduct business. The regulation took effect in January 2009 after a rule imposed by the Centers for Medicare & Medicaid Services (CMS). The requirement is aimed at curbing medical fraud and malpractice.

In most cases, suppliers are required to obtain a Medicare bond, also called DMEPOS bonds, by the government-mandated deadline. There are a couple unique exceptions. The bond amount will actually increase beyond $50,000 for suppliers deemed high risk. At the same time, some suppliers may qualify for an exemption from the Medicare (DMEPOS) Bond requirement. Those can include:

• Government-operated suppliers that have provided CMS with a comparable surety bond under state law.

• Private-practice and state-licensed orthotic and prosthetic workers making custom orthotics and prosthetics

• Physicians and non-physician practitioners, as defined in section 1842(b)(18) of the Social Security Act, if the items are furnished only to the physician or non-physician practitioner’s patients as part of the service. Also covered are: physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse-midwives, clinical social workers, clinical psychologists and registered dietitians or nutrition professionals.

• Physical and occupational therapists in private practice.

Suppliers with multiple locations need to be aware that bonds are required for each National Provider Identifier (NPI). For example, a larger DMEPOS supplier with five locations would have to obtain a $250,000 Medicare (DMEPOS) Bond, one for each location. Further, DMEPOS suppliers will have to obtain additional $50,000 surety bonds for any adverse legal actions taken against the company within the past 10 years before enrolling. Those adverse legal actions can include:

* Losing Medicare billing privileges

* Suspension or revocation of a license

* Loss or suspension of accreditation

* A felony conviction

* Exclusion from a federal or state health care program

Currently, there are no exceptions for nursing homes or pharmacies that bill for Medicare DMEPOS to their own residents. But some pharmacy lobbying groups and related associations are urging Congress to enact exemptions for pharmacies before the deadline strikes.

California car dealers are facing legislation that would require a bond increase from $50,000 to $100,000. Dealers who sell trailers used exclusively to transport vessels may also be affected. If the bill passes the state will require dealers who sell trailers to obtain a $50,000 California MVD.

The text reviews the expectations for dealers with required surety bonds: if a customer suffers loss or damage at the hands of the dealer then that person has a right to take action against the dealer and his surety. In this bill there are a few minor changes in wording regarding payment of sureties.

The bill is called the Car Buyers’ Protection Act of 2009 and can be tracked as SB 95.

The Tennessee state legislature is working on a piece of legislation that would require debt management companies to obtain surety bonds.

The bill aims to safeguard Tennessee citizens who use debt management services. Due to the economy, many people are getting deeper and deeper into debt. Those who use debt management services should not be taken advantage of financially by companies who claim to help their clients get out of debt.

If this bill passes, debt management companies would have to

• post a surety bond or another security to protect the money received from clients
• obtain a license
• supply information about their employee qualifications, educational materials, practices and fees
• disclose that using the service may affect customers’ credit ratings

Surety bonds
In this instance surety bonds would protect the clients who give credit payment money to the debt management companies. The surety bond would guarantee that the client’s money remained safe once in the possession of the company.

Tracking the Bill
Senator Doug Overbey introduced SB 812, called the “Uniform Debt Management Services Act,” back in February. On May 4, the Tennessee State Senate approved the bill, and the house approved it on June 8.  The bill is currently still in the legislative process.