Letter of Credit – Definition

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Letter of Credit – Definition A Letter of Credit (LOC) is correspondence issued by a bank guaranteeing payment for goods and services purchased by the one requesting the letter. An Irrevocable Letter of Credit, or ILOC, cannot be canceled or modified in any way without explicit consent by the affected parties involved. For example, the issuing bank has no power to change the terms of an ILOC simply because the requesting company changes their mind. Letter of Credit Requirements DDOT will accept an Irrevocable Letter of Credit (LOC) in lieu of a cash security deposit to protect the Agency against loss resulting from poor restoration of public space by commercial customers. It is very important that the information on the Irrevocable Letter of Credit is correct and complete. Otherwise, DDOT cannot honor it in lieu of a cash security deposit. 1. The following must be in the text of the Irrevocable Letter of Credit before submission: a. The letter must be printed on the issuing financial institution's letterhead bearing its name and address. b. The Irrevocable Letter of Credit remains in effect for two years. c. The letter must contain an issuing number for the Irrevocable Letter of Credit. d. The Irrevocable Letter of Credit must be signed by an officer of the financial institution. e. The beneficiary with the address of: District Department of Transportation, Public Space Regulations Administration, 1100 4th Street SW, Suite 360E, Washington, DC 20024 f. The dollar amount of the Irrevocable Letter of Credit is equal to the amount of security deposit requested and must cover the entire project. Partial credits are not authorized. 2. The name on the Irrevocable Letter of Credit (ILOC) must be the same “Owner” information as it appears on the permits and on the online permitting system (TOPs) 3. DDOT will charge $150 administrative fee for the use of an irrevocable letter of credit (ILOC), $50 renewal fee. A “continuation letter” must be in place 30-days prior to the expiration of the ILOC. If not in place before the ILOC expires, applicant will pay the $150 administrative fee for the new bond. 4. A list of contractors/subcontractors that will be working under the ILOC must be submitted to the Permits Transactions Officer prior to the issuing of such permits. These persons listed will be only agents authorized to use bond to cover construction related deposits. .

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