In order to maintain compliance with California law regulations, motor vehicle dealerships must obtain a surety bond in the amount of $50,000 as a part of the licensing process. This bond is also known as auto dealer bond or car dealer bond. Some incorrectly assume the dealer bond is meant to provide protection or insurance for the dealership. However, in actuality the bond is there to protect consumers in case the consumer has a claim against dealership.

If a dealership fails to adhere to certain laws, a consumer can file a surety bond claim against them. This can lead to the revocation of their bond, costly legal action, and in many cases, the inability to continue operating their business.

Following the next steps might help your dealership avoid this situation:

• Car dealerships should implement a process to ensure compliance with all laws and regulations that apply to their business.
• They should also regularly review these regulations to make sure they are up to date.
• Strict adherence to the regulations and regular reviews of them can help prevent potential lawsuits or other legal action resulting from a violation.
• Dealerships should have an understanding of their obligations under the terms of the surety bond and be aware of any changes that may occur in order to avoid any claims against the bond.
• Dealerships should NEVER ignore phone calls, emails, letters, faxes, or any other communication from their bond company.

HIGHLY IMPORTANT: If one of your customers files a claim with your bond company or names the surety company in a lawsuit or demand letter in which your dealership is also named as a defendant, immediately contact your bond company and let them know you understand and acknowledge your obligations under any agreements you have signed with them, or according to the law. Whatever you do, DO NOT IGNORE THEIR LETTERS, EMAILS, OR CALLS!!! Better yet, call your lawyer immediately as time may be of the essence.