Privatization of Money Bail

In a previous post, I described the basic structure of for profit bail and addressed potential concerns with the privatization of this section of criminal justice. This post will address whether private bail agents save taxpayers’ money, increase efficiency and innovation in pretrial release, allow policymakers to focus on policy instead of procedure, streamline and downsize government, and, for their customers, whether they increase flexibility of service, quality of service, and the appearance rate in court.

The best approach to this analysis is to look at the service needed, the service actually provided, and the comparative costs and benefits of the private system against public systems. (Here’s an alternative analysis concluding that financial remuneration for pretrial detainees is a preferred solution). The service needed is simple. We presume the innocence of criminal defendants and, in order to not deprive them of liberty without any proven reason, we release the defendant pending trial. The public wants assurances that the released defendant will: 1) not endanger public safety during pretrial release and 2) show up to court (or prevent a failure to appear, “FTA”). Money bail only addresses one of those needs – the failure to appear, discussed below. For the sake of argument, and because the bail industry claims to protect public safety, I address public safety first. Continue reading “Privatization of Money Bail”

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You’re a CA County Concerned About Potential Ill-Effects of Commercial Bail, What Can You Do?

State law often allows counties to regulate industries at a local level. For example, the business and professions code 25612.5, which regulates alcohol in California, states in article 1 that these regulations are “state standards that do not preclude the adoption and implementation of more stringent local regulations that are otherwise authorized by law.” This allows a county to be “dry” and prohibit alcohol even though alcohol is a legal drug in the United States. Even if a county cannot regulate an industry directly, it can indirectly influence that industry through a variety of legal strategies, such as regulating land use. This post identifies California-specific local solutions to bail concerns that may improve the way bail bondsmen interact with criminal defendants. Continue reading “You’re a CA County Concerned About Potential Ill-Effects of Commercial Bail, What Can You Do?”

Privatization of Money Bail

What I hear about bail agents (often called bail bondsmen) is that they provide a valuable service and keep our communities safe at no cost to the taxpayer. According to the bail bond industry, they are dedicated to developing best practices that should lead to: maximizing the pretrial release of criminal defendants; minimizing days between arrest and pretrial release of criminal defendants; and protecting public safety. Facially, it seems to make sense – aren’t those goals precisely in line with the service provided? Confusingly, both commercial bail industry insiders and those in opposition to money bail (see page 29) point to the same data sources to support their competing (or opposing) arguments. In this post I outline the economic reasoning behind money bail and the role of a commercial bail agent in pretrial release. While proponents of the privatization of money bail suggest that there are gains to efficiency and service, a closer look reveals that legal constraints, profit motives, and shifting responsibility of financial risk away from defendants may actually detract from the goals of money bail as well as the purported goals of the commercial bail industry. This discussion does not address public policy or whether a privatized system for money bail is just. Instead, the focus is on economic arguments that support and detract from the proposition that a for-profit bail system makes fiscal sense.

Because private industry emphasizes efficiency and customer satisfaction in order to improve its bottom line, some public needs such as public transit and communications infrastructure may benefit from privatization. The introduction of competition provides incentives for private businesses to provide better goods, better services, and lower prices. Adam Smith described this effect as an “invisible hand” that guides economic actors to, “without intending it, without knowing it, advance the interest of the society. . . .”

But while most people agree that some industries are well served by privatization, certain other sectors of the economy should not be left to private interests. This is because some public goods, such as the military, are potentially dangerous if left to private actors and other public needs may present a conflict of interest if a profit motive is introduced. Imagine if the fire department had to give priority to profit over saving lives and property. Or imagine that we were concerned only with efficiency and not equity—that would mean that mailing a letter to a rural area would be more expensive than mailing the same letter to an urban one.

Courts rely more and more on financial bail terms; 61% of pretrial releases in 2009 included money bail, up from 37% in 1990. Given this increase, it becomes more and more important to analyze whether privatization of money bail serves the goals of money bail to begin with or if this is one of those areas that should not be exposed to the potential inequities or perverse incentives of a profit driven industry.

To begin with, money bail, in general, is not always an option. Some defendants are deemed too great a flight risk due to the magnitude of the potential sentence, or too great a danger either because of the nature of the alleged crime(s) (e.g., article 1 section 12 of California’s Constitution) or simply because of the type of offense (see Cal. Pen. Code 853.6(a)(2)-(3)). If money bail is set, it is constitutionally protected from being “excessive,” which the United States Supreme Court has interpreted as any amount “higher than an amount reasonably calculated to fulfill the purpose of assuring the presence of the defendant [at trial].”

In the federal system, since the Bail Reform Act of 1984, the safety of individuals and the community are factors in determining bail eligibility (denying bail as “preventive detention”), but the money bail amount is addressed separately. In fact, the Bail Reform Act clarifies in section 3148(c)(2) that “[a] judicial officer may not impose a financial condition that results in the pretrial detention of the person.” (emphasis added). The General Accounting Office found that the introduction of preventive detention resulted in 49% of defendants remained in federal pretrial detention as ineligable for money bail (which leaves 51% detained because they “failed to pay the bail set by the court”).

In California, the magistrate setting money bail amounts must take into account public safety. This is probably because, unlike the federal system described above, California law does not allow preventive detention for public safety reasons. Some people have questioned the validity of the idea that money bail can or does promote public safety. Judge Curtis Karnow writes that “there is no relationship between the dollar amount of bail and any in terrorem inhibiting effect that would deter future criminal conduct by the defendant.” Rather, other bail conditions can address public safety, such as supervision, GPS monitoring, mandatory drug tests, enrollment in a rehabilitation program, and the like. For this, and future, posts I agree with Judge Karnow’s analysis and address the economics of money bail by assuming that the purpose of money bail is purely to address the potential failure to appear of a defendant.

Because public safety is not a factor in money bail (at least in the federal system, and in general by the assumption above), commercial bail agents have at most a very limited role to play in public safety.   The service provided by the bail industry is a safeguard against failure to appear, the very thing that money bail is supposed to provide without a private industry. This is because there are different ways in which money bail can be arranged. For example, collateral, usually in the form of cash, can be given to the court and returned when the defendant appears at all court dates. More commonly, a private bail agent will put up a promissory note to the court in exchange for a 10% fee from the defendant and, in theory, if the defendant fails to appear the agent is responsible for the money bail amount. I will focus on this second form of money bail, called commercial surety bail.

Looking at the function of bail, it is clear that the bail industry does not have much to add. Our system decides on a dollar value that a defendant must pay if they fail to appear – reasoning that this financial risk will ensure their appearance. Then, instead of having the defendant actually take on that financial risk, we have them pay a nonrefundable fee to a commercial bail agent. The defendant is now out usually 10% of their bail amount, and now their risk is to the bail agent, usually in the form of collateral for the full 100%. Keep in mind that the 10% is just the bail agent’s fee, in the event of a failure to appear the bail agent can collect the full 100% from the defendant either alone or in combination with any co-signors. At the same time, the bail agent has assumed the financial risk due to the court, but is both covered by the defendant (and co-signors, as mentioned) and also by their surety provider (an insurance company that, usually in exchange for a percentage of the bail agent’s fee, indemnifies the bond). It is worth noting that a bail agent is usually licensed and defined by law as an agent for a surety provider.

In short, it appears that not only do commercial bail agents fail to provide the safety that their industry claims, but by absorbing the financial risk of the released defendant it is plausible that an agent might actually negatively effect the behavior of a released defendant. In subsequent posts I will address commonly cited privatization benefits, and analyze whether these are true for commercial bail bonds. These reasons include, among others, saving taxpayers’ money, increasing flexibility of service, improving quality of service, increasing efficiency and innovation, allowing policymakers to focus on policy instead of procedure, streamlining and downsizing government, and, of course, the appearance rate of money bail defendants in court.

The Invisible Hand of For Profit Bail

My name is Forest Miles. I am currently a third year law student at Santa Clara University. Prior to beginning my studies at Santa Clara University, I obtained my B.S. in Physics from San Jose State University.  This background has led me to my current field of work – patent prosecution. Throughout the course of my law school career, I have engaged in multiple projects pertaining to human rights work.  In particular, I have participated in several clinical programs offered by Santa Clara where I gained hands on exposure to human rights work.  For example, I have had the opportunity to prepare participants for a thematic hearing with the Inter-American Commission.  I have also co-authored an amicus curiae brief for a case before the Inter-American Court.

This semester, I am seeking to tie together my human rights experience with another interest of mine – criminal law.  Criminal law and policy is becoming increasingly intertwined with human rights issues.  For example, the United States is facing increasing pressure by human rights groups for its policies on solitary confinement, capital punishment, and life sentences for juveniles.  My focus, though, is on the United States’ nearly unique “for-profit,” or privatized, bail system.

Ideally, I would like to leverage my experience with various legal structures to analyze the for-profit bail system.  The bail industry is large, highly profitable, and arguably serves a public need.  Under closer examination, however, it is not clear that: the jobs created by the industry surpass an equivalent public model; the monetization creates competition, which drives better service for customers; the needs of our justice system are well met; or even that the industry accomplishes its most basic function, to ensure that those accused of crimes show up for trial.  Additionally, I will examine the public policy motivations and detractions behind monetizing the pretrial release of the presumptively innocent defendants in our criminal justice system.