II

103D CONGRESS

1ST SESSION S. 1259

To amend chapter 93 of title 31, United States Code, to provide additional

requirements for a surety corporation to be approved by the Secretary

of the Treasury, to provide for equal access to surety bonding, and

for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 20 (legislative day, JUNE 30), 1993

Mr. SIMON (for himself and Ms. MOSELEY-BRAUN) introduced the following

bill; which was read twice and referred to the Committee on the Judiciary

A BILL

To amend chapter 93 of title 31, United States Code, to

provide additional requirements for a surety corporation

to be approved by the Secretary of the Treasury, to

provide for equal access to surety bonding, and for other

purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Equal Surety Bond

5 Opportunity Act of 1993’’.
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1 SEC. 2. ADDITIONAL REQUIREMENTS REGARDING AP2 PROVAL OF SURETIES.

3 (a) IN GENERAL.—A company may not be approved

4 as a surety by the Secretary of the Treasury under section

5 9304 of title 31, United States Code, or provide any surety

6 bond pursuant to such section unless the company main7 tains full compliance with the requirements of section

8 9310 of title 31, United States Code.

9 (b) REQUIREMENTS RELATING TO ENFORCE10 ABILITY.—

11 (1) SIGNED STATEMENT OF COMPLIANCE WITH

12 APPLICATION.—Section 9305(a) of title 31, United

13 States Code, is amended—

14 (A) by striking ‘‘and’’ at the end of para15 graph (1);

16 (B) by striking the period at the end of

17 paragraph (2) and inserting ‘‘; and’’; and

18 (C) by adding at the end the following new

19 paragraph:

20 ‘‘(3) a statement of compliance with section

21 9310, which is signed under penalty of perjury by

22 the president and the secretary of the corporation.’’.

23 (2) COMPLIANCE AS A CONDITION FOR AP24 PROVAL OF APPLICATION.—Section 9305(b) of title

25 31, United States Code, is amended—
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1 (A) by striking ‘‘and’’ at the end of para2 graph (2);

3 (B) by striking the period at the end of

4 paragraph (3) and inserting ‘‘; and’’; and

5 (C) by adding at the end the following new

6 paragraph:

7 ‘‘(4) the corporation is in full compliance with

8 section 9310.’’.

9 (3) SIGNED STATEMENT OF COMPLIANCE WITH

10 QUARTERLY REPORTS.—Section 9305(c) of title 31,

11 United States Code, is amended by inserting ‘‘and a

12 statement of compliance with section 9310,’’ before

13 ‘‘signed and sworn’’.

14 (4) ENFORCEMENT AUTHORITY OF SECRETARY

15 OF THE TREASURY.—Section 9305(d) of title 31,

16 United States Code, is amended—

17 (A) in paragraph (1), by striking ‘‘9304 or

18 9306’’ and inserting ‘‘9304, 9306, or 9310’’;

19 and

20 (B) by striking ‘‘and’’ at the end of para21 graph (2);

22 (C) by striking the period at the end of

23 paragraph (3) and inserting ‘‘; and’’; and

24 (D) by adding at the end the following new

25 paragraph:
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1 ‘‘(4) may, after the end of the 1-year period be2 ginning on the effective date of any revocation under

3 paragraph (1) of the authority of a surety corpora4 tion for noncompliance with section 9310, reauthor5 ize such corporation to provide surety bonds under

6 section 9304.’’.

7 (5) REVOCATION FOR FAILURE TO PAY CER8 TAIN JUDGMENTS.—Section 9305(e) of title 31,

9 United States Code, is amended—

10 (A) by striking ‘‘and’’ at the end of para11 graph (1);

12 (B) by redesignating paragraph (2) as

13 paragraph (3); and

14 (C) by inserting after paragraph (1) the

15 following new paragraph:

16 ‘‘(2) the corporation does not pay a final judg17 ment or order against the corporation for noncompli18 ance with section 9310, or fails to comply with any

19 order under that section; and’’.

20 (c) TECHNICAL AND CONFORMING AMENDMENT.—

21 Section 9304(a)(3) of title 31, United States Code, is

22 amended by striking ‘‘9305 and 9306’’ and inserting

23 ‘‘9305, 9306, and 9310’’.
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1 SEC. 3. INFORMATION FOR BOND APPLICANTS AND NON2 DISCRIMINATION.

3 (a) IN GENERAL.—Chapter 93 of title 31, United

4 States Code, is amended by adding at the end the follow5 ing new section:

6 ‘‘SEC. 9310. INFORMATION FOR BOND APPLICANTS; NON7 DISCRIMINATION.

8 ‘‘(a) REASONS FOR ADVERSE ACTION; PROCEDURE

9 APPLICABLE.—

10 ‘‘(1) NOTICE REQUIRED.—

11 ‘‘(A) IN GENERAL.—Except as provided in

12 subparagraph (B), any surety approved under

13 section 9304 shall notify an applicant for a bid

14 bond, payment bond, or performance bond of its

15 action on a completed application within 10

16 days of receipt of the application.

17 ‘‘(B) EXTENSION.—The notification re18 quired by subparagraph (A) may be furnished

19 within 20 days, if the surety has not issued a

20 bond to the applicant in the preceding 12

21 months.

22 ‘‘(2) STATEMENT OF REASONS.—

23 ‘‘(A) IN GENERAL.—Each applicant

24 against whom adverse action is taken shall be

25 entitled to a statement of reasons for such ac26 tion from the surety.
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1 ‘‘(B) ACCEPTABLE FORMS OF STATE2 MENT.—A surety satisfies the requirements of

3 subparagraph (A)—

4 ‘‘(i) by providing a statement of rea5 sons in writing as a matter of course to

6 applicants against whom adverse action is

7 taken; or

8 ‘‘(ii) by giving written notification of

9 adverse action which discloses—

10 ‘‘(I) the applicant’s right to a

11 statement of reasons not later than 30

12 days after receipt by the surety of a

13 written request made by the applicant

14 not later than 60 days after such noti15 fication; and

16 ‘‘(II) the identity of the person or

17 office from which such statement may

18 be obtained.

19 ‘‘(C) ORAL STATEMENT PERMITTED.—A

20 required statement of reasons for adverse action

21 may be given orally if written notification ad22 vises the applicant of the applicant’s right to

23 have the statement of reasons confirmed in

24 writing upon the applicant’s written request.
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1 ‘‘(3) SPECIFICITY OF REASONS.—A statement

2 of reasons meets the requirements of this section

3 only if it contains specific reasons for the adverse

4 action taken.

5 ‘‘(4) APPLICABILITY IN CASE OF THIRD PARTY

6 APPLICATIONS.—In the case of a request to a surety

7 by a third party to issue a bond directly or indirectly

8 to an applicant, the notification and statement of

9 reasons required by this section may be made di10 rectly by such surety, or indirectly through the third

11 party, if the identity of the surety is disclosed to the

12 applicant.

13 ‘‘(5) APPLICABILITY IN CASE OF SURETIES

14 WHICH ACCEPT FEW APPLICATIONS.—The require15 ments of paragraphs (2), (3), and (4) may be satis16 fied by oral statements or notifications in the case

17 of any surety which acted on not more than 100 ap18 plications during the calendar year in which the ad19 verse action is taken.

20 ‘‘(b) NONDISCRIMINATION.—

21 ‘‘(1) ACTIVITIES.—It shall be unlawful for any

22 surety to discriminate against any applicant, with

23 respect to any aspect of a surety bond transaction—

24 ‘‘(A) on the basis of race, color, religion,

25 national origin, sex, marital status, disability,
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1 or age (if the applicant has the capacity to con2 tract);

3 ‘‘(B) because the applicant has in good

4 faith exercised any right under this chapter;

5 ‘‘(C) because the applicant previously ob6 tained a bond through an individual or personal

7 surety; or

8 ‘‘(D) because the applicant previously ob9 tained a bond through—

10 ‘‘(i) any bonding assistance program

11 expressly authorized by law;

12 ‘‘(ii) any bonding assistance program

13 administered by a nonprofit organization

14 for its members or an economically dis15 advantaged class of persons; or

16 ‘‘(iii) any special purpose bonding pro17 gram offered by a profitmaking organiza18 tion to meet special needs.

19 ‘‘(2) ACTIVITIES NOT CONSTITUTING DISCRIMI20 NATION.—It shall not constitute discrimination for

21 purposes of this section for a surety—

22 ‘‘(A) to make an inquiry of marital status

23 if such inquiry is for the purpose of

24 ascertaining the surety’s rights and remedies
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1 applicable to the granting of a bond and not to

2 discriminate in a determination of bondability;

3 ‘‘(B) to make an inquiry of the applicant’s

4 age if such inquiry is for the purpose of deter5 mining the amount and probable continuance of

6 bondability; or

7 ‘‘(C) to make an inquiry as to where the

8 applicant has previously obtained a bond, in

9 order to determine bonding history, or other

10 pertinent element of bondability, except that an

11 applicant may not be assigned a negative factor

12 or value because such applicant previously ob13 tained a bond through—

14 ‘‘(i) an individual or personal surety;

15 ‘‘(ii) a bonding assistance program ex16 pressly authorized by law;

17 ‘‘(iii) any bonding program adminis18 tered by a nonprofit organization for its

19 members or an economically disadvantaged

20 class of persons; or

21 ‘‘(iv) any special purpose bonding pro22 gram offered by a profitmaking organiza23 tion to meet special needs.

24 ‘‘(3) ADDITIONAL ACTIVITIES NOT CONSTITUT25 ING DISCRIMINATION.—It is not a violation of this
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1 section for a surety to refuse to issue a bond pursu2 ant to—

3 ‘‘(A) any bonding assistance program au4 thorized by law for an economically disadvan5 taged class of persons;

6 ‘‘(B) any bonding assistance program ad7 ministered by a nonprofit organization for its

8 members or an economically disadvantaged

9 class of persons; or

10 ‘‘(C) any special purpose bonding program

11 offered by a profitmaking organization to meet

12 special needs,

13 if such refusal is required by or made pursuant to

14 such program.’’.

15 (b) DEFINITION OF ADVERSE ACTION.—Section

16 9301 of title 31, United States Code, is amended—

17 (1) by striking the period at the end of para18 graph (1) and inserting a semicolon;

19 (2) by striking the period at the end of para20 graph (2) and inserting ‘‘; and’’; and

21 (3) by adding at the end the following new

22 paragraph:

23 ‘‘(3) ‘adverse action’—

24 ‘‘(A) means a denial of a bond, a change

25 in the terms of an existing bonding arrange-
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1 ment, or a refusal to issue a bond in the

2 amount or on substantially the terms requested;

3 and

4 ‘‘(B) does not include any refusal to issue

5 an additional bond under an existing bonding

6 arrangement where the applicant is in default,

7 or where such additional bond would exceed a

8 previously established bonding limit.’’.

9 SEC. 4. CIVIL PENALTIES.

10 Section 9308 of title 31, United States Code, is

11 amended—

12 (1) in the first sentence by striking ‘‘A surety

13 corporation’’ and inserting the following:

14 ‘‘(a) LIABILITY TO THE UNITED STATES.—A surety

15 corporation’’;

16 (2) in the second sentence by striking ‘‘A civil

17 action’’ and inserting the following:

18 ‘‘(c) JURISDICTION.—A civil action’’;

19 (3) in the third sentence by striking ‘‘A penalty

20 imposed’’ and inserting the following:

21 ‘‘(d) EFFECT OF PENALTIES ON CONTRACTS.—A

22 penalty imposed’’; and

23 (4) by inserting after subsection (a) (as des24 ignated by paragraph (1)) the following new sub25 section:
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1 ‘‘(b) LIABILITY FOR DISCRIMINATORY ACTION.—Any

2 surety corporation that fails to comply with section

3 9310(b) shall be liable to the applicant for—

4 ‘‘(1) any actual damage sustained by such ap5 plicant (individually or as a member of a class); and

6 ‘‘(2) in the case of any successful action under

7 this subsection, the costs of the action, together with

8 reasonable attorney’s fees, as determined by the

9 court.’’.

10 SEC. 5. REGULATIONS.

11 The Secretary of the Treasury shall issue such pro12 posed regulations as may be necessary to carry out this

13 Act not later than 270 days after the date of the enact14 ment of this Act. The final regulations shall become effec15 tive not later than 1 year after the date of enactment of

16 this Act.

17 SEC. 6. EFFECTIVE DATE.

18 The amendments made by this Act shall become ef19 fective on the earlier of—

20 (1) the effective date of final regulations pro21 mulgated pursuant to section 5; or

22 (2) the end of the 1-year period beginning on

23 the date of enactment of this Act.

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