Every industry is scrambling to adapt to the effects of the COVID-19 pandemic, and the surety bond industry is no different. Officials from two leading professional organizations – The Surety & Fidelity Association of America (SFAA) and the National Association of Surety Bond Producers (NASBP) – are calling on Congress to issue an emergency action altering how bond agreements work. Whether or not these changes will take effect and when remains to be seen. However, in order to keep bond holders and bond applicants alike fully-informed, the experts at Viking Bond Service wanted to keep you informed about the developments thus far.
Calling for a Paperless Electronic Surety Bond System
In a statement to congress, SFAA President and CEO Lee Covington said, “It is imperative to adopt a solution immediately for work on these critical projects to begin and continue, while maintaining important protections for small business construction firms, workers and taxpayers.”
What was he talking about with such urgency? Specifically, the fact that surety bond agreements require wet signatures witnessed by a notary, which means exchanging documents person-to-person. Close human contacts put countless people at risk – not just the two parties involved – which is why the CDC is recommending staying at home as much as possible and social distancing when outside the home. These measures are critical for public health – but they make it much harder to complete bond agreements safely and efficiently.
More than just an administrative wrinkle, being unable to complete bond agreements means that countless construction projects can’t proceed, including infrastructure projects that could be critical for the pandemic response or to revive the economy. These may be unprecedented times, but that doesn’t mean anyone has decided to forego bonding requirements. Contractors large and small still need bonds, which forces them to make an impossible choice: put their health at risk or put their business on hold?
The SFAA and the NASBP have joined together to appeal to Congress to allow electronic signatures on bond agreements. Here are the specific requests:
- With respect to all construction bonds, public procurement officials shall accept all bonds and powers of attorney containing e-signatures and e-corporate seals affixed to each document, and waive the notary requirement.
- With respect to all commercial surety bonds, government officials shall accept all bonds and powers of attorney containing e-signatures and e-corporate seals affixed to each document, and waive the notary requirement.
Congress has not yet taken steps to amend the wet signature requirement, and it’s unclear how they will act. On the one hand, the two industry groups make a compelling case for action, and surety bonds are an instrumental part of the economy. Changing the rules removes red tape at a time when we need to be working effectively. But, on the other hand, enterprises and industry groups have bombarded Congress with special requests in recent weeks with no priority given to the surety industry. Realistically, Congress could ignore or deny the request.
What a Paperless Electronic Surety Bond System Means for You
First of all, let us reiterate that, as of the time of writing, the bond process works exactly the same as before. The obligee in a bond agreement – meaning the party that requires the bond – will need documents signed and notarized in person. The surety – meaning the party that issues the bond – needs signed documents as well. Admitely, finding a notary to work with and practicing safe social distancing throughout make the bonding process more complicated, time consuming, and risky than it used to be.
Should congress take action to allow for electronic signatures, some in the bond industry will be better prepared to adapt than others. Accepting electronic signatures takes the right technology and processes, which aren’t necessarily in place at every bond company nationwide. Eliminating the need for wet signatures makes things easier for the industry as a whole. But it could actually make things harder for individual bond applicant’s if they can’t find a company equipped to handle electronic signatures.
Don’t let this become a problem for you. Viking Bond Service has the resources in place to immediately start processing electronic signatures should Congress decide to take action. As a nationwide surety brokerage connecting people with all kinds of surety bond types – from construction bonds to court bonds – we strive to be accommodating and adaptable. As part of that mission, we have already put processes in place to start seamlessly processing electronic signatures. Whether things stay the same, change as requested, or take a left turn no one expects, Viking Bond Service stands prepared to serve.
Apply for a Bond at Anytime
You shouldn’t let the uncertainty of this moment delay your plans to get a bond. Now as always, you can’t proceed with many contracts, civil actions, or professional licensure applications until you can prove you have the required bond with the correct signatures. Viking Bond Service makes that easy anytime. Use our online bond application to start exploring bond options, or call us at 1-888-278-7389 to learn more about surety bonds generally or about the rule changes currently waiting on Congress.