North Carolina Discount Buying Club Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a North Carolina Discount Buying Club bond
At a Glance:
- Lowest Cost: $1,000 per year or $100 per month, based on the applicant’s credit history
- Bond Amount:
- All clubs: 100 times the annual one-time membership fee, or $50,000, whichever is greater
- Clubs that meet certain requirements and choose not to hold member funds in a trust account: $50,000
- Who Needs it: All discount buying clubs operating in North Carolina
- Purpose: To ensure that the public will receive compensation for financial harm if the club commits fraud or violates consumer contracts
- Who Regulates Discount Buying Clubs in North Carolina: The North Carolina Attorney General
Background
North Carolina Statute 66-135 requires all discount buying clubs operating in the state to file a surety bond with the Attorney General before conducting business. The North Carolina legislature enacted the surety bond requirement to ensure that discount buying clubs engage in ethical business practices.
The same statute also requires discount buying clubs to hold all advance payments in a trust account. However, clubs are exempt from the trust account requirement if their contracts satisfy the criteria set forth in North Carolina Statute 66-132(b), they bill their customers through a credit card account, and they purchase an additional $50,000 surety bond.
What is the Purpose of the North Carolina Discount Buying Club Bond?
North Carolina requires discount buying clubs to purchase a surety bond as a prerequisite to conducting business operations. The bond ensures that the public will receive compensation for financial harm if the club fails to abide by the regulations outlined in the North Carolina Statute 66-135. Specifically, the bond protects consumers if the club engages in any acts of fraud or violates any consumer contracts. In short, the bond is a type of insurance that protects the public if the discount buying club acts unethically.
How Can an Insurance Agent Obtain a North Carolina Discount Buying Club Surety Bond?
BondExchange makes obtaining a North Carolina Discount Buying Club Bond easy. Simply login to your account and use our keyword search to find the “Discount” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
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Is a Credit Check Required for the North Carolina Discount Buying Club Bond?
Surety companies will run a credit check on the applicant to determine eligibility and pricing for the North Carolina Discount Buying Club bond. Applicants with excellent credit and work experience can expect to receive the best rates. Applicants with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the applicant’s credit.
How Much Does the North Carolina Discount Buying Club Bond Cost?
The North Carolina Discount Buying Club Bond can cost anywhere between 2% to 10% of the bond amount per year. Insurance companies determine the rate based on several factors including your customer’s credit score and experience. BondExchange also offers monthly pay-as-you-go options for these bonds. The chart below offers a quick reference for the cost of a $50,000 bond requirement.
$50,000 Discount Buying Club Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $1,000 | $100 |
| 680 – 799 | $1,875 | $188 |
| 650 – 679 | $2,500 | $250 |
| 600 – 649 | $3,750 | $375 |
| 550 – 599 | $5,000 | $500 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
Who is Required to Purchase the Bond?
North Carolina requires discount buying clubs to purchase a surety bond before conducting business operations. By default, clubs must hold all advance payments collected in a trust account until the goods or services have been provided or a refund has been requested. However, clubs are exempt from the trust account requirement if they purchase an additional $50,000 surety bond, bill their customers through a credit card account, and use consumer contracts that meet the following criteria:
- Members do not pay more than a $100 annual fee
- Members can cancel contracts at any time and receive a full refund of their initiation or annual fee
- Contains the following message in boldface on the first page: “You, the customer, may cancel this contract at any time and receive a total refund of any fees or consideration already paid for the current membership period. To cancel you must notify the company in writing of your intent to cancel.”
- Is mailed to the member on or before the first bill is issued
To paraphrase North Carolina Statute 66-131, a discount buying club is any person or organization that offers consumers discounted goods and/or services in exchange for a membership fee.
Exemptions to this definition include:
- Cooperative buying associations where no person profits
- Organizations that, for $50 or less, sell tickets or coupons to be used at retail locations
- Organizations that, as part of their regular course of business and for no additional charge, arrange for members or customers to receive discounts at specified merchants
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
What are the Licensing Requirements for Discount Buying Clubs in North Carolina?
North Carolina does not require discount buying clubs to obtain a state license. However, clubs may need to obtain a local business or tax license and should check with their local municipal authority before soliciting North Carolina consumers.
What are the Insurance Requirements for Discount Buying Clubs in North Carolina?
North Carolina does not require Discount Buying Clubs to obtain any form of liability insurance. All discount buying clubs must purchase and maintain a surety bond in an amount equal to 100 times the annual one-time membership fee, or $50,000, whichever is greater. Clubs seeking to be exempt from the requirement to hold all advance payments in a trust account may do so if they, among other things, purchase and maintain an additional $50,000 bond.
How Do North Carolina Discount Buying Clubs File Their Bonds?
Discount buying clubs should mail their completed bond forms, including the power of attorney, to the following address:
PO Box 629
Raleigh, NC 27602
The surety bond requires signatures from the surety company that issues the bond and from the seller. The surety company should include the following information on the bond form:
- Legal name, address, and state of incorporation of the entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Bond amount
- Date the bond is signed
What Can North Carolina Discount Buying Clubs do to Avoid Claims Made Against Their Bonds?
To avoid claims against their bonds, Discount Buying Clubs in North Carolina must follow all regulations in the state, including some of the most important issues below that tend to cause claims:
- Do not engage in any acts of fraud
- Do not breach any contracts made with purchasers
- Issue all owed refunds
What Other Insurance Products Can Agents Offer Discount Buying Clubs in North Carolina?
Although not required to most reputable discount buying clubs will purchase liability insurance. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for North Carolina Discount Buying Club Customers?
North Carolina unfortunately does not provide a public database of active discount buying clubs in the state. We suggest contacting the Attorney General’s Office to obtain this information. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.