Alabama Private School Agent Bond

What Is the Purpose of the Private School Agent Bond?

Sections 46-16-1 through 10 of the Code of Alabama 1975 have regulations in place for private postsecondary institutions, including private school agents in affiliation with those institutions. The Alabama Community College System (ACCS) mandates private school agents to obtain a permit and keep it active in order to solicit students or sell any course. The ACCS will not issue the permit until a $2,500 Private School Agent Bond is on file. The surety bond guarantees restitution should a student of the school or the ACCS encounter financial damage as a result of the agent’s misrepresentation, deception, or fraudulent actions.

Who Needs the Private School Agent Bond?

Any private post-secondary institution in Alabama that is selling courses and/or soliciting students for enrollment requires a permitted agent to have a Private School Agent Bond. A Private School Agent in Alabama is considered anyone who solicits students, sells courses, or dispenses materials for the institution and does so online or by mail, phone, distance learning education, or any other means of advertising.

There are some exemptions from the regulations, and the required bond, according to Section 16-46-3 of the Code of Alabama.

What Do Surety Underwriters Need to Know About the Private School Agent Bond?

From speaking with industry experts, it is proven that losses on the Alabama Private School Agent Bond are infrequent. Due to the low bond limit of $2,500, along with the low number of licensed private postsecondary institutions in Alabama, the likelihood of a claim on the bond is minuscule. 

Among other reasons, the agent could see a claim on the bond for failure to obtain a permit prior to soliciting students to enroll in the institution or providing false/misleading information. With the involvement of the Alabama Community College System, the bond is often used as a last resort when other corrective actions don’t work. The ACCS has jurisdiction to suspend or revoke an agent’s permit, or place the agent on probation pending correction of the infraction. The agent may also face civil penalties of up to $500 for not abiding by the legislation.

Although the bond limit is small, the Suretypedia team suggests a credit check of the private school agent to accurately assess the risk associated. The agent’s permit is valid for two years, so many surety companies will offer the bond for a one- or two-year term.

What Do Surety Claims Handlers Need to Know About the Private School Agent Bond?

Both the public and the Alabama Community College System are able to take action against the bond. 

Whether the claim originated from the public or the ACCS, by the time it reaches the Surety it has already been through a rigorous investigation process. Students must submit a Petition for Review to the Alabama Community College System Chancellor, who will appoint a hearing officer to conduct the hearing. Within 30 days of a hearing concluding, the hearing officer submits a final order with the ACCS Chancellor that includes details about the decisions made. Within 10 days of receipt of the final order, the Chancellor must deliver notice to all parties by certified mail.

In the State of Alabama, there is no specific process for surety claims handling, but it is recommended to complete the process within 30 days of receipt of the notice from the ACCS.

How Much Does the Alabama Private School Agent Bond Cost?

The bond is priced based primarily on the credit of the applicant, typically starting at around $100 for one year.

How Is the Private School Agent Bond Filed?

An original bond that is both signed and sealed is required by the Alabama Community College System. A copy of the bond should be sent to the private school agent for their records. Licensing and other paperwork can be sent to the following address:

Alabama Community College System
PO Box 302130
Montgomery, AL 36130

Can the Private School Agent Bond Be Cancelled?

Yes, surety companies are able to request cancellation of the bond with the ACCS for any reason with a 30-day written notice. The bond does remain active and on file for that 30-day period, so that should be factored into any unused premium being returned to the agent. 

Do Private School Agent Bonds in Alabama Renew? 

Yes, private school agents must hold a bond for the duration their permit is active. The bond form does have an expiration date, so payment is required to extend the bond coverage. Permits last for two years, so sometimes agents will purchase the bond to line up with the license, but that is not required. Most commonly, bond terms are in one- and two-year terms.