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What's New: General

Opinion: Licensing and Bonding Just Make More Sense

Monday, April 16, 2018  

In April 2017, a cosmetologist in Houston was charged with practicing medicine without a license. The Harris County District Attorney stated that the cosmetologist caused medical complications in at least two patients due to the injections administered. After receiving a treatment, one patient reported going to the emergency room and was told she had an infection from the substance injected into her body.

A man from Troy, New York was arrested for practicing architecture without a license. He was accused of defrauding municipalities, businesses and construction firms in three counties over the course of seven years. New York Attorney General Eric Schneiderman’s office stated the individual allegedly falsified field reports, building plans and inspections, which put the safety of all those who lived in or visited the buildings at-risk.

Occupational licensing is a credentialing requirement that certain professions must obtain before being allowed to practice to help protect the health and safety of consumers. Without it, more issues like the above examples will occur, but there is a growing debate across the country as to the effectiveness of the occupational licensing requirements.

In recent years, there has been bipartisan consideration of occupational licensing and the impact on the economy, labor force and small businesses. The Obama Administration, the Trump Administration and Congress have put resources into studying and addressing issues with occupational licensing. Several national state legislative associations are doing the same. The increased interest stems from the growing number of occupations that need licenses. According to the Brookings Institute, less than five percent of the workforce needed to be licensed in the 1950s as compared to over 30 percent today. There is a concern that many occupational licensing requirements have become simply a barrier to entry by rather than a way to protect consumers.

Perhaps the solution to the occupational licensing issue is to rely more on the use of surety bonds rather than imposing more administrative or bureaucratic burdens on the licensee. Why? The North Carolina Commissioner of Banks Ray Grace explains in the SFAA and Governing Institute’s joint publication, A Government Leader’s Guide to Bonds, “We look at surety bonds, not just for quick and reliable payment in the event that the company defaults on obligations or is unable to honor them, but we also look at them as an additional measure of due diligence that applied to these companies.”

During the underwriting process, a surety company reviews an individual or company’s financials and capabilities to engage in the business being licensed. Through this process, the surety company is vetting the individual or company to make sure they can uphold the obligations of the bond. When a surety company issues a bond, this signals that in the surety’s opinion, the individual or company is competent and qualified to do the work.

The ultimate goal of occupational licensing is consumer protection. Lawmakers should focus on how to strengthen the aspects that are working, such as including surety bonds on license requirements. The protection provided by surety bonds can do more for consumer safety and protection than increasing some of the burdensome requirements to get the license. And if trouble does arise, the surety company is there to pay claims.

“Whether it’s nail salons, mortgage brokers or the money transmission industry, bonds are good public policy for state and local agencies. Whenever there is an obligation, there needs to be assurance that agencies can protect consumers and seek remedy for any malfeasance. Bonds give states and localities a pathway to achieve this aim,” A Government Leader’s Guide to Bonds.

View the March/April 2018 Newsletter 



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