As of January 1, 2018, Illinois motor vehicle dealers and remittance agents will be subject to a substantial increase to the amount of their state-required surety bonds. Senate Bill 1556 was enacted on August 30, 2017 and increases the amount of the surety bond for auto dealers from $20,000 to $50,000 per location. The new law also stipulates that remittance agents must submit a bond in the minimum amount of $20,000, though the amount may be higher if the agent’s remittances for the fiscal year exceed $20,000. Previously, the minimum bond amount for remittance agents was set at $10,000. Once the bond amount has been increased, dealers and remittance agents must submit proof of compliance to the Illinois Secretary of State.
What is the difference between motor vehicle dealers and remittance agents?
A motor vehicle dealer in Illinois is someone who sells at least five vehicles during the calendar year. A person may also be referred to as a motor vehicle dealer if they act as an intermediary, agent or broker for another currently licensed automobile dealer. The designated agent bond for motor vehicle dealers is required to ensure Illinois motor vehicle dealers collect and remit all taxes and fees to be collected, pursuant to the Illinois Vehicle Code. If the licensee fails to do so, the bond is in place to provide financial protection for the state and its residents. Once the dealer has remitted applicable taxes and fees, it is the remittance agent who accepts those taxes and fees on behalf of the State of Illinois, including its local governments and officials.
How will this affect premiums for Illinois motor vehicle dealers and remittance agents?
Because the premium for vehicle dealer bonds and remittance agent bonds is determined as a rate, instead of an exact figure, it will most likely increase along with the amount of the bond. Therefore, if a dealer is currently paying a 1% rate on their $20,000 bond, and the bond is increasing to $50,000, their $200 premium will likely become a $500 premium, despite the fact they are still receiving a 1% rate on the bond.
For Illinois motor vehicle dealers and remittance agents who are currently paying 3-5%, an increase like this can result in financial strain. However, because these bonds are issued for a one-year term, they are subject to an annual review by an underwriter, who will determine the premium owed for the following year. This can be good news for the dealer or remittance agent because the underwriter may determine the licensee to be more highly qualified due to factors like experience in the industry and improved credit. If the licensee suffered financial loss or their credit worsened over the previous year, they may find they are quoted at a higher rate than before.
If a dealer or remittance agent opts not to pay their renewal premium due to an increase, the bond will be canceled, meaning the license will be canceled as well. If a dealer or remittance agent has a license canceled, they will most likely have to begin the application process over if they decide to re-apply in the future. Therefore, the decision of whether or not to renew a motor vehicle dealer or remittance agent bond is an important one that should be made after careful consideration.
Are there any other important changes to be aware of?
Along with an increased bond amount, new law increases the number of months a dealer or remittance agent must be bonded. Prior to the new law’s enactment, licensees were not required to keep a bond in effect once the bond had remained effective for 36 months. SB 1556 increases the duration to 60 months—five years—before a licensee may be exempt from the bond requirement.
How to increase the amount of your surety bond
If you are currently licensed and bonded as an Illinois motor vehicle dealer or remittance agent and need to increase the amount of your bond, SuretyBonds.com is here to help. Give us a call at 1 (800) 308-4358 to speak with one of our surety experts or click below get your free, no obligation quote!Get a Free Surety Bond Quote