SENATE BILL REPORT

SB 5201

BYSenator Lee

Establishing the professional licensing recovery fund.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):January 31, 1989

Senate Staff:Steve Boruchowitz (786-7429)

AS OF JANUARY 23, 1989

BACKGROUND:

Surety bonds are often required for various licensees in order to protect the consumer from a licensee's failure to meet statutory requirements or bankruptcy.  Many bond amounts have remained unchanged for many years.  As such, they do not provide a great deal of consumer protection.  An aircraft dealer bond, for example, is only $25,000 and applies to dealers of small and large aircraft.  Merely raising bond amounts could unfairly increase costs to reputable licensees, and could deter new business development.

In response, some states have instituted a recovery fund system.  These funds typically have reduced costs for business and increased protection (in dollar amount) for the consumer.  Washington State has two recovery funds currently in statute.

SUMMARY:

A four-year pilot project is established in the professional programs division of the Department of Licensing.  The following license categories will be included in a recovery fund system:  auctioneers, cosmetology schools, debt adjusters, hearing aid fitters, collection agencies, employment agencies, and notaries public.  The department shall determine the amount of the fee to be deposited in the fund by each licensee, by calculating the licensee's relative share of potential liability.  Total liability for each licensee shall be at least three times the current surety bond amount, and an individual claimant may claim up to one-third of a licensee's total liability.  The fund shall be initially capitalized at $600,000, and a licensee shall pay its share of the required $3,000,000 operating balance (within five years) in semi-annual payments.  A four-year sunset provision is included.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested January 23, 1989