If you work in the telemarketing industry, you probably have to jump though quite a few hoops to remain in compliance with industry regulations. Without an understanding of surety bonds, you might consider them to be just another one of those inconvenient, time-consuming hoops. However, if you know the purpose behind these risk-mitigation tools ahead of time, you’ll be better prepared when you have to apply for one. With a basic understanding of surety bonds, you’ll also appreciate the role they play in regulating the telemarketing industry.
If you’ve been told you have to purchase a surety bond for your telemarketing business, you probably have two questions.
- What is a surety bond?
- Why do I need one?
These are common questions many business owners have when government agencies inform them they need to be bonded before they can be licensed.
Government agencies require professionals in certain industries to provide surety bonds for two main reasons: 1) to reinforce industry regulations and 2) to protect consumers from financial loss. As such, each telelmarketing surety bond that’s issued functions as a contract that binds three parties together.
- The obligee is the government agency that requires a surety bond.
- The principal is the business that must purchase a bond as a guarantee that work will be completed in accordance with industry regulations.
- The surety is the insurance underwriter that issues the bond, therefore backing the principal’s work.
If a bonded telemarketing business fails to fulfill the bond’s terms, the obligee can collect reparation by making a claim against the bond. If the claim is valid, the surety will pay for the losses. However, because surety bonds are more like lines of credit than insurance policies, the underwriter will require the principal to fully repay it for any claims paid out.
The Benefits of Bonding
Telemarketing surety bonds benefit the industry in three key ways.
- Surety bonds uphold industry integrity. Depending on the contractual language your state uses, your bond might reinforce an array of laws. For example, the Florida Telemarketing Act requires that telemarketing businesses have $50,000 worth of bonding coverage to benefit any consumer who is injured as a result of the company’s bankruptcy or breach of agreement as outlined under Florida Statutes 501.601-501.626.
- Surety bonds reduce competition by keeping unqualified business owners out of your industry. Because surety providers intend to avoid losses as a result of claims, they use extreme caution when issuing bonds. When business owners don’t have the financial credentials necessary to qualify for a bond, surety providers will deny their applications. When business owners can’t procure a surety bond as required by law, they won’t be able to operate a telemarketing enterprise.
- Surety bonds reassure the public that you run a trustworthy enterprise. Having the vote of confidence from a surety provider shows both consumers and the government that you intend to run your telemarketing enterprise according to industry regulations.
The Importance of Being Bonded
No matter where you plan to operate your telemarketing enterprise, you should always know where you stand when it comes to bonding. Surety bond requirements vary greatly depending on the state in which you’ll be working and the government agency that regulates the local industry. As you begin
the licensing process, you’ll want to contact whatever government agency regulates telemarketing enterprises to determine whether you need a bond.
If you find out you need a bond, always verify the exact expectations. For example, you’ll need to know which surety bond form you need and how much coverage you have to purchase. Failing to maintain the correct surety bond as required by law can mean penalty fines, license revocation and even legal action.
Telemarketing professionals have a number of concerns to worry about when preparing to open a new business. With a basic understanding of surety bonds, you can alleviate some of the stress that comes along with the license, bonding and registration processes.