They have been called many things, but treated all the same—peddlers, solicitors, itinerant merchants, transient vendors, and canvassers. For the sake of this article let's stick to the term ‘merchants’. And while enjoying the freedom of traveling from place to place selling goods and services, merchants may find themselves in need of a surety bond to conduct business in a local municipality.
The local government or organization uses the surety bond as a tool to guarantee that the people who transact with the roaming vendor are not scammed without recourse. Also, these officials guarantee they can get their fees, commission, or taxes if not paid by the merchant.
The surety bond brings in a third-party financial guarantor (Jet Insurance Company) to guarantee they will make payment for damages if the merchant skips town. As a wise man once said, “a tempest must be true to its nature”, and so these merchants are required to get a surety bond.
What Not to Do
Merchants should avoid the following activities so no complaints happen and they are let back into town at the next event:
- Not paying taxes, fees, or commissions
- Failing to provide promised services
- Selling faulty merchandise
- Not making recompense for legitimate complaints
Who Can Make a Bond Claim
A customer who is financially damaged by faulty merchandise or does not receive services paid for will most likely lodge a complaint to the event organizer, city, or county. If the complaint is justified and the merchant is unwilling to correct the mistake a bond claim can be made.
The organizer or public official who contracted with or permitted the merchant’s business can also make a claim on the surety bond. They would claim financial damage for unpaid taxes, fees, or commissions.
When Can a Claim Be Made
A claim can only be made against the merchant’s bond for a transgression made during the bond’s active period. Most often bonds have a 30-day grace or cancellation period that extends liability past the date when Jet files for cancellation. Other times, Jet must await release after cancellation has been requested.
There also can be a variable time period at which a claim can be made against a prior bond for past transgressions made during the bond’s active period. This bond tail or statutes of limitation will vary from state to state.
How Much Does the Bond Cover
The most Jet can payout for a bond (no matter how many complaints) is the set bond limit stated on the bond form. For these merchant bonds, the limit is typically set at $1,000-5,000.
In the event of multiple claims that exceed the bond’s limit in total, each jurisdiction has different rules on who gets paid and at what percentage, but on average the amount paid out is weighted on how much financial damage was sustained by each party.
This is the most common way a complaint would progress into a bond claim. Results may vary (and we hope these complaints never happen at all).
- Complaint made to the local authority or event organizer
- Complaint is verified as legitimate
- Merchant does not make amends or is unresponsive
- Authority/organizer demands payment from surety company (Jet)
- Surety company reviews claim to determine the validity
- If valid, the surety company makes payment to the damaged party
- Merchant makes payment back to the surety company
The last step may need some explaining, but it is a key principle in all surety bond arrangements that must be understood. At the outset of the bond’s issuance, the merchant is indemnifying the surety company against all damages. Unlike insurance, the surety bond is a line of credit for the public or government’s sake. The creditor (surety company) still needs to be paid back by the person the credit was extended to—in this case, a fraudulent merchant.
You may think, “There is no risk for the surety company, why even have a bond?” A fair point. However, at the point where the surety company has to make payment, the merchant may have decided to refuse to pay damages or just doesn’t respond. There is little chance the surety company will be paid back unless the merchant wants back in the city or event. They will have to get another surety bond and prove to the city, county, or whoever demands the bond that the prior transgression was rectified.
Learn More About Peddler, Itinerant Merchant, Transient Vendor Bonds
Select the state you are interested in to read more about these bonds and purchase a bond if necessary.