A Driving School Bond is a requirement in some states for commercial driving schools. It's an agreement involving three parties: the driving school itself (known as the principal), the entity or state that demands the bond (referred to as the obligee), and the company issuing the bond, the surety. This bond protects the interests of the driving school's students. It helps prevent fraud and misrepresentation while ensuring that the driving school complies with the laws and regulations of their specific state. Different states may use varying names for this bond, such as "license tester bond," "CDL third-party company bond," or "commercial driver training school bond." The required bond amount varies by state, typically ranging from $2,000 to $50,000.
The cost of a driving school bond varies depending on two key factors: the specified bond amount and the percentage of that amount that a customer is required to pay. The bond amount is typically determined by the specific state's regulations. For instance, Ohio mandates a $2,000 bond, while Illinois requires a much higher $50,000 bond. Typically it is somewhere between $2,000 to $50,000. The percentage a customer pays is determined by the surety company, taking into consideration several factors. These factors include the customer's credit score, their level of experience, and the financial stability of their business. Out of these factors, credit score has the most significant impact. Customers with higher credit scores will pay a lower percentage for their bond and customers with lower credit scores will pay a higher percentage, if they are approved. The percentage of a bond amount that a customer pays is somewhere between 1% and 20%.
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Driving schools in certain states are required to get a driving school bond as part of their licensing process. Certain states have begun to regulate driving schools due to the misrepresentation that was common in the industry, such as guaranteeing employment opportunities after the completion of a commercial driving license class. As part of these regulations some states require a driving school bond to protect students in case their driving school was to use any illegal or unethical business practices.
Currently only certain states have licensing requirements for driving schools and each of them has different requirements for their driving school bond. At this time, only the following states regulate their driving schools: Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, and Wisconsin. We recommend checking with your state’s department that handles driving school licensing to check the requirements.
For driving school bonds, the most common claims are due to fraudulent misrepresentation or the school not following the proper regulations for their record keeping. However, any unfuilfilled promises or illegal practices can lead to a claim being filed against a driving school bond. For example, if a commercial driving school guarantees employment to it’s graduates and fails to follow through on that promise, then a claim can be filed against the driving school bond.
Once a claim is filed, the surety company that is providing the bond will conduct an investigation to determine the value and validty of the claim. During this investigation, they may request additional information from the obligee and principal in order to make their final decision. If the claim is valid, the surety company will pay the affected parties up to the bonded amount for the claim. It’s important to remember that after a bond claim is paid out, the surety company will then recoup the claim amount from the principal, the driving school. The driving school will be responsible to repay the surety company for the claim, and if they do not, then their bond can be cancelled and their license can be suspended. Not paying back a claim can also lead to difficulties getting a new bond in the future because surety companies will access the business’ claim history during their application. It’s always in the best interest of the business to avoid claims but, if they do happen, paying back the claim will reduce the long-term impact it could have.
The process of renewing a driving school bond can vary from one state to another, so it's important to carefully review the specific requirements set forth by your state's regulatory authority. To renew your license or permit, you'll either need to obtain a new bond or provide evidence of continuous bond coverage. Renewing the bond is generally a straightforward procedure. In most cases, the surety company will take the initiative by contacting you within a window of 45 to 30 days before your existing bond expires. They will guide you through the necessary steps and documentation to ensure a smooth and timely renewal process, allowing you to continue operating your driving school in compliance with your state's regulations.
