II

104TH CONGRESS

1ST SESSION S. 666

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

APRIL 4 (legislative day, MARCH 27), 1995

Mr. SIMON 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 1995’’.
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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 (B) by striking ‘‘and’’ at the end of para20 graph (2);

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

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

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

24 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 not later than

16 10 days after receipt of the application.

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

19 not later than 20 days after receipt of the ap20 plication, if the surety has not issued a bond to

21 the applicant in the 12-month period preceding

22 the date of receipt of the application.

23 ‘‘(2) STATEMENT OF REASONS.—

24 ‘‘(A) IN GENERAL.—Each applicant

25 against whom adverse action is taken shall be
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1 entitled to a statement of reasons for such ac2 tion from the surety.

3 ‘‘(B) ACCEPTABLE FORMS OF STATE4 MENT.—A surety satisfies the requirements of

5 subparagraph (A)—

6 ‘‘(i) by providing a statement of rea7 sons in writing as a matter of course to

8 applicants against whom adverse action is

9 taken; or

10 ‘‘(ii) by giving written notification of

11 adverse action which discloses—

12 ‘‘(I) the applicant’s right to a

13 statement of reasons not later than 30

14 days after receipt by the surety of a

15 written request made by the applicant

16 not later than 60 days after such noti17 fication; and

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

19 office from which such statement may

20 be obtained.

21 ‘‘(C) ORAL STATEMENT PERMITTED.—A

22 required statement of reasons for adverse action

23 may be given orally if written notification ad24 vises the applicant of the applicant’s right to
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1 have the statement of reasons confirmed in

2 writing upon the applicant’s written request.

3 ‘‘(3) SPECIFICITY OF REASONS.—A statement

4 of reasons meets the requirements of this section

5 only if it contains specific reasons for the adverse

6 action taken.

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

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

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

10 to an applicant, the notification and statement of

11 reasons required by this section may be made di12 rectly by such surety, or indirectly through the third

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

14 applicant.

15 ‘‘(5) APPLICABILITY IN CASE OF SURETIES

16 WHICH ACCEPT FEW APPLICATIONS.—The require17 ments of paragraphs (2), (3), and (4) may be satis18 fied by oral statements or notifications in the case

19 of any surety which acted on not more than 100 ap20 plications during the calendar year in which the ad21 verse action is taken.

22 ‘‘(b) NONDISCRIMINATION.—

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

24 surety to discriminate against any applicant, with

25 respect to any aspect of a surety bond transaction—
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1 ‘‘(A) on the basis of race, color, religion,

2 national origin, sex, marital status, disability,

3 or age (if the applicant has the capacity to con4 tract);

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

6 faith exercised any right under this chapter;

7 ‘‘(C) because the applicant previously ob8 tained a bond through an individual or personal

9 surety; or

10 ‘‘(D) because the applicant previously ob11 tained a bond through—

12 ‘‘(i) any bonding assistance program

13 expressly authorized by law;

14 ‘‘(ii) any bonding assistance program

15 administered by a nonprofit organization

16 for its members or an economically dis17 advantaged class of persons; or

18 ‘‘(iii) any special purpose bonding pro19 gram offered by a profitmaking organiza20 tion to meet special needs.

21 ‘‘(2) ACTIVITIES NOT CONSTITUTING DISCRIMI22 NATION.—It shall not constitute discrimination for

23 purposes of this section for a surety—

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

25 if such inquiry is for the purpose of
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1 ascertaining the surety’s rights and remedies

2 applicable to the granting of a bond and not to

3 discriminate in a determination of bondability;

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

5 age if such inquiry is for the purpose of deter6 mining the amount and probable continuance of

7 bondability; or

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

9 applicant has previously obtained a bond, in

10 order to determine bonding history, or other

11 pertinent element of bondability, except that an

12 applicant may not be assigned a negative factor

13 or value because such applicant previously ob14 tained a bond through—

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

16 ‘‘(ii) a bonding assistance program ex17 pressly authorized by law;

18 ‘‘(iii) any bonding program adminis19 tered by a nonprofit organization for its

20 members or an economically disadvantaged

21 class of persons; or

22 ‘‘(iv) any special purpose bonding pro23 gram offered by a profitmaking organiza24 tion to meet special needs.
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1 ‘‘(3) ADDITIONAL ACTIVITIES NOT CONSTITUT2 ING DISCRIMINATION.—It is not a violation of this

3 section for a surety to refuse to issue a bond pursu4 ant to—

5 ‘‘(A) any bonding assistance program au6 thorized by law for an economically disadvan7 taged class of persons;

8 ‘‘(B) any bonding assistance program ad9 ministered by a nonprofit organization for its

10 members or an economically disadvantaged

11 class of persons; or

12 ‘‘(C) any special purpose bonding program

13 offered by a profitmaking organization to meet

14 special needs,

15 if such refusal is required by or made pursuant to

16 such program.’’.

17 (b) DEFINITION OF ADVERSE ACTION.—Section

18 9301 of title 31, United States Code, is amended—

19 (1) by striking the period at the end of para20 graph (1) and inserting a semicolon;

21 (2) by striking the period at the end of para22 graph (2) and inserting ‘‘; and’’; and

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

24 paragraph:

25 ‘‘(3) ‘adverse action’—
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1 ‘‘(A) means a denial of a bond, a change

2 in the terms of an existing bonding arrange3 ment, or a refusal to issue a bond in the

4 amount or on substantially the terms requested;

5 and

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

7 an additional bond under an existing bonding

8 arrangement where the applicant is in default,

9 or where such additional bond would exceed a

10 previously established bonding limit.’’.

11 SEC. 4. CIVIL PENALTIES.

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

13 amended—

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

15 corporation’’ and inserting the following:

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

17 corporation’’;

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

19 action’’ and inserting the following:

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

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

22 imposed’’ and inserting the following:

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

24 penalty imposed’’; and
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1 (4) by inserting after subsection (a) (as des2 ignated by paragraph (1)) the following new sub3 section:

4 ‘‘(b) LIABILITY FOR DISCRIMINATORY ACTION.—Any

5 surety corporation that fails to comply with section

6 9310(b) shall be liable to the applicant for—

7 ‘‘(1) any actual damage sustained by such ap8 plicant (individually or as a member of a class); and

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

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

11 reasonable attorney’s fees, as determined by the

12 court.’’.

13 SEC. 5. REGULATIONS.

14 The Secretary of the Treasury shall issue such pro15 posed regulations as may be necessary to carry out this

16 Act not later than 270 days after the date of the enact17 ment of this Act. The final regulations shall become effec18 tive not later than 1 year after the date of enactment of

19 this Act.

20 SEC. 6. EFFECTIVE DATE.

21 The amendments made by this Act shall become ef22 fective on the earlier of—

23 (1) the effective date of final regulations pro24 mulgated pursuant to section 5; or
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1 (2) the end of the 1-year period beginning on

2 the date of enactment of this Act.

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