Motor vehicle dealers in Florida and mortgage brokers in Ohio are quickly approaching their April 30 bond renewal date. Both of these bonds are categorized as license and permit bonds due to the fact that the state requires them in order for an individual to be licensed as a motor vehicle dealer or mortgage broker.
License and permit bonds are issued on behalf of the obligee to guarantee certain protections from the principal. For example, if it is discovered that a motor vehicle dealer has been selling stolen vehicles to their customers, the provisions of the bond allow for anyone hurt by the actions of the dealer to file a claim against the bond. The same is true for mortgage brokers in that, if they are found to act in a manner contrary to the terms of the bond, a claim may be made against their bond as well.
I haven’t used my bond. Do I still need it?
Yes! License and permit bonds are required for as long as the individual wishes to keep their license effective. By paying a premium for the bond, the surety guarantees to the obligee that the funds are available to them, much like a line of credit. The individual must continue to pay for their bond renewal until they decide that they no longer wish to keep their license active. Should they wish to re-activate their license, they will have to restart the process of purchasing a surety bond. However, the fact that an applicant had a surety bond previously with no claims against it will generally be viewed favorably by the underwriter reviewing the application, which may result in a lower rate.
How do I complete my bond renewal?
The process of renewing a bond is similar to when it was initially purchased. Typically, a renewal specialist will contact the motor vehicle dealer or mortgage broker within 90 days of their renewal to inform them that their renewal date is approaching, at which point the principal will need to undergo a credit check by an underwriter who will then provide a quote. Once a quote has been given, the principal must pay the necessary premium for their bond renewal. Upon receipt of the payment, the surety will issue the proper documentation to ensure that the bond is renewed without issue.
The reason that an underwriter must review the applicant’s credit is to see if any major changes have taken place since the last time it was looked at. For example, if an applicant’s credit has improved drastically, then they may be approved at a lower premium than what they paid for their last term. Conversely, if the credit score has lowered, then they may be quoted higher.
What happens if I don’t renew my bond on time ?
As stated previously, these bonds are required in order to keep a license active, so renewing on time is of utmost importance. Failure to renew on time may result in the suspension of a license until a new bond is provided to the obligee. If the principal delays the process for too long, their license may be revoked and they will have to restart the entire application process, including paying all application fees, in order to have their license reactivated. If an individual continues to act as a motor vehicle dealer or mortgage broker while their license is suspended or revoked, they could find themselves facing punitive action, including fines and/or jail time.