California Discount Buying Organization Parent and Affiliate Bond
Know why this bond is required, how it works, and how to easily apply for one!
What is a California Discount Buying Organization Parent and Affiliate Bond?
This bond is required when a discount buying organization establishes a trust account at a federally insured bank or savings and loan association. Both a parent and an affiliate shall obtain this bond in lieu of the $20,000–discount buying organization bond required by Section 1812.103 of the California Civil Code.
A parent is defined a business entity that operates or has franchised 25 or more discount buying organizations for a period of 10 or more years.
An affiliate discount buying organization, on the other hand, is a subsidiary of the parent.
The purpose of this bond is to provide compensation to any member of the affiliate discount buying organization who has committed a violation. Some of the violations are as follows:
- The affiliate failed to comply with the terms of the membership contract.
- The affiliate failed to comply with the terms of any agreement regarding the purchase of goods or services.
This surety bond requirement is in pursuance of Section 1812.117 of the California Civil Code.
The parent must submit an aggregate bond along with a letter of credit.
How does a California Discount Buying Organization Parent and Affiliate Bond work?
This bond is a three-party agreement whereas one party (Surety) guarantees the fulfillment of another party’s (Principal) lawful obligations to a third party (Obligee or the People of the State of California).
A claim will only be made if the Principal has committed a bonded violation. Prior to settling the claim, the Surety will first check if the claim is valid and if the claim is covered by the bond. If the claim meets all the criteria, the Surety will pay it on behalf of the Principal. The Principal must reimburse the Surety under the terms of the bond.
How much does a California Discount Buying Organization Parent and Affiliate Bond cost?
The bond premium will start at 1% of the bond amount for discount buying organizations who have excellent credit scores.
$250,000 – affiliate discount buying organization
$2,500,000 – parent
How can I get a California Discount Buying Organization Parent and Affiliate Bond?
- You must first apply for this bond. You may APPLY HERE!
- After we have received your application, we will ask you to submit the necessary information needed for the underwriting process. These are the following:
- Your financial capability
- Your business or job performance history
- Your credit score
An expert underwriter will carefully evaluate all three in order to attain the best credit decision possible. To avoid any delay, the information that you should submit should be organized and concise.
- Once the underwriting process is done, your surety bond will be issued and sent to you!