Is a License Required?
California does require vehicle auctioneers and auction companies to be licensed in order to operate legally within its borders.
Is There a Bonding Requirement?
One of the requirements for obtaining an auctioneer license from the California Secretary of State is posting an auctioneer surety bond, also referred to as an auto auction bond.
Anyone who plans to auction new or used vehicles in the state of California must purchase a $20,000 California auctioneer bond as an essential step in the license application process.
This bond protects the state and an auctioneer�s customers, not the auctioneer. The bond is an auctioneer�s guarantee to comply with the California Civil Code and relevant ethical standards. Any infraction can result in a claim filed against the bond by a party who has suffered a financial loss as a result of that infraction.
How Do Auctioneer Bonds Work?
Every surety bond agreement is a legally binding contract that brings together three parties:
- The obligee, the party requiring the bond, is the California Secretary of State.
- The principal, the party required to purchase the bond, is the auctioneer or auction company.
- The surety is the California-licensed surety bond company that underwrites and issues the bond.
Some of the more common violations committed by auto auctioneers include:
- Failing to account for payments from customers
- Mishandling of funds
- False or misleading advertising
- Misrepresentation of vehicles up for auction
There are plenty of other ways in which an auctioneer or auction company can cause consumers to suffer a financial loss through unethical or fraudulent business practices.
Any violation of the terms and conditions of an auto auctioneer bond can result in a claim being filed against the bond by the injured party. In most cases, the surety will pay a valid claim, then collect reimbursement from the principal. In effect, the surety makes a short-term loan to the principal, which must be repaid. The principal is ultimately responsible for paying claims or reimbursing the surety.
What Do They Cost?
The state of California has established the required bond amount as $20,000. But the principal pays an annual premium that is only a small percentage of that amount. The primary factor the surety considers in setting the premium rate for a given bond applicant is the applicant�s personal credit score, though the individual�s financial history and industry experience can also enter into the picture.
The premium rate for applicants with good credit is between 1% and 3% of the bond amount, or as little as $200 for the $20,000 bond. Those with poor credit may pay a higher premium rate to compensate for the higher risk to the surety.
Get The Bond You Need
Apply online with Single Source Insurance today for the auto auctioneer bond you need to obtain or renew your auctioneer.