A telemarketing bond is a specialized and very specific type of surety bond. It is required by most state government agencies in order to assure proper and successful transactions between the telemarketing company and its clients. This type of bonds will require telemarketing companies or telemarketing businesses to carry out their services in full compliance to the state and federal laws that regulate any commercial transaction. The detailed conditions and expectations required by a telemarketing bond will change slightly according to the specific legal language in which the bond is underwritten, but most of them oblige the telemarketing company or business to offer and provide a clean service during the whole transaction process, from telephone calls to in-time delivery of the sold product. As with any other surety bond, a telemarketing bond is a contract where there are three main parties involved.
The principal is the telemarketing company or business that will have to purchase the bond. This principal purchases the bond claiming to have the ability to always work under the regulations or the exact laws that control the business. The bond plays as a financial guarantee that will control the principal’s transactions.
The second party involved is the obligee, which in most cases is a federal or state government agency. Most government entities require that any telemarketing-driven company or business purchase a bond before applying for or renewing a license. This is done to protect consumers from any possible financial loss during the transaction with the principal.
Finally, the third party is called the surety, which most of the time is represented by an insurance company. The surety is the party who will sell, underwrite and issue the bond. It is also the party that will assure to the obligee that the principal will fulfill and compete with all the laws involved. If the principal fails to compete with any of the laws that regulate their transaction, the obligee can make a claim to the surety against the bond. The surety will study the situation to find if the claim is valid. In the event of a valid claim, the surety will pay the obligee for the claim and turn to the principal for a reimbursement plus involved legal fees.
Telemarketing bonds are different from other surety bond because the product or service the telemarketing company or business provides will directly affect the cost of the bond. This is because some businesses are riskier than other, according to the region in which the telemarketing company is operating. Some businesses have better chances to succeed than others, thus making them more reliable and less risky. A timeshare telemarketing business in California, for example, would be a risky business compared to the same service in most other states. If the business is riskier, the bonds will be more expensive.
Most surety bonds professionals assure that the average coverage price for a telemarketing bond ranges from $20,000 to $50,000, but it might go as low as $10,000 or as high as $100,000. It will depend on the product the telemarketing deals with, and the state in which it operates.
All this said, the question as to why is a telemarketing bond needed still needs some clarification. Firstly, there is a clear difference between and insurance and a surety bond. A surety bond is a contract between three parties, while insurance has only two parties involved: the insurance company and the insured. A surety bond is made to ensure proper business between a service provider and a consumer. It is a protection for the consumer and a way for a government entity to have some regulation over the industry represented by the telemarketing company. Adding a third party to the equation makes the telemarketing bond more reliable to achieve successful and clean transactions and full competence with provided laws and regulations.