TELEMARKETING BONDS
Information courtesy of ALLEN, MITCHELL & ALLEN PLLC                                                                                                               (801) 930-1117
Telemarketing Bonds Q&A
 Q: What is a telemarketing bond?
A: A telemarketing bond is a surety bond which some states require call centers to obtain before they can legally call into those particular states.  A surety bond is similar to an insurance policy, but is also more complex.  When a telemarketer obtains a surety bond in order to get a local telemarketing license, the bond acts like an insurance policy with the beneficiary of that policy being the consumers of the state for which the bond was obtained.  For example, in order to obtain a Utah telemarketing license, most call centers must first obtain a surety bond and a Utah telephone solicitor license.  If the call center then violates Utah telemarketing law and harms Utah consumers, the Utah Attorney General can file a claim against the bond - similar to filing an insurance claim against an insurance policy.  If the bonding company confirms the violations, the bonding company will pay out the bond money to the state in order to refund Utah consumers who were harmed by the telemarketer's conduct.  Then, the bonding company will seek reimbursement from the call center as if the bond had been a loan.  The call center will be required to repay the bonding company.  So long as the call center does not violate the law, the insurance company which issued the bond will only charge an annual premium to keep the bond in place.

 Q: How do I know if I need telemarketing bonds?
A: Whether you need telemarketing bonds depends on a number of factors.  The most important factor is usually which states you will be calling.  Even if you are fully licensed and bonded in your home state, many states require you to get their local license and place a state-specific bond if you want to call into their state.  Other important factors regarding whether you need telemarketing bonds include: what you sell, how you dial telephone numbers (manual vs. autodialing), whether you have prior permission from call recipients, etc.  The bonding requirements are usually part of local state telemarketer licenses.  Thus, the above factors are important to whether you are exempt from the various state telemarketing licenses.  Consult with an experienced telemarketing attorney to determine which licenses and bonds you need.  Many exemptions apply, but you should be 100% certain that you qualify for an exemption before using it, or significant telemarketing fines may result.

 Q: Where can I obtain a telemarketing bond?
A: Many insurance companies issue surety bonds. Some companies even specialize in telemarketing surety bonds. There are many options so telemarketers should be sure to obtain quotes from multiple companies before purchasing any bonds. Call centers should also confirm that they absolutely need the bond before obtaining it - many exemptions apply and bond premiums are expensive.  After you know for certain that you need the bond, speak with your preferred corporate insurance broker, who may be able to help you obtain quotes from multiple bonding companies.

 Q: How difficult is it to apply for a telemarketing bond?
A: Applying for a telemarketer bond is similar to applying for a loan.  The insurance company will ask for information about the entity or individual that needs the bond.  Most of the information applicants will need to provide is about the applicant's income, assets, and overall financial health.  Insurance companies often avoid issuing surety bonds to call centers who have little or no income or assets, or who are unable to obtain qualified co-signors.  This is not insurance advice so be sure to consult with a licensed, experienced insurance professional in order to obtain additional information and quotes.

 Q: How much does a telemarketing bond cost?
A: The cost of the annual bond premiums will usually depend on the financial position of the applicant, and on whether the applicant obtained co-signors or placed collateral.  Annual premiums range from around 1%-10% of the total bond amount, depending on these factors.

 Q: What if I cannot obtain a bond?
A: If the applicant cannot obtain a bond, some states accept alternatives, such as irrevocable letters of credit from a bank.  If the call center cannot obtain a required bond or letter of credit, the call center may be unable to call into the state whose bond requirement cannot be satisfied.
.
Important Disclaimer:
The information provided on this website is informational only and is not legal advice or attorney advertising. There is no guarantee that the information provided is accurate, complete, or up to date. This is a cursory summary only and likely contains some errors.  You should not rely on this information without first consulting a competent telemarketing lawyer.