Illegal Bail Practices

I was driving last Sunday when an ad came on the radio for Aladdin Bail Bonds. Intrigued, I turned up the volume in time to catch the ad telling listeners to go with their agency, because other agencies only give you “gobbledygook.” I smiled to myself. The “gobbledygook” of the bail industry is what I had been thinking about for weeks. Heck, my whole criminal law and policy class had been thinking about it for weeks. Let me tell you, dear reader, about the “gobbledygook” of the bail industry, in the form of all the illegal practices that get bail agencies into trouble.

As I talked about in my last post, the bail industry is fiercely competitive. This has led some bail agents to turn to illegal bail practices to stay in the game. Just last year, a sting brought down 31 bail agents in 5 of our local counties (Santa Clara, Alameda, Mon20800521029_9d77204ea8_nterey, San Benito and Merced County). In Santa Clara County, the sting involved some of our most prominent bail agencies: Aladdin Bail Bonds, All-Pro Bail Bonds, and Bail Hotline Bail Bonds. The sting, ironically named “Operation Bail Out,” was put together through cooperation between the California Department of Insurance and the Santa Clara County District Attorney’s office. This cooperation was long overdue. The California Department of Insurance had been receiving complaints against bail agents for years. As early as 2013, there were so many complaints that the Department of Insurance thought it necessary to send out a “reminder” letter of solicitation laws to all licensed bail agents in California.

Even local bail agents themselves had been pushing for better enforcement of bail laws. The former President of the Santa Clara County Bail Association told me that he had been recommending enforcement of the laws for years. Frustrated with the illegal practices of other bail agencies, he had been pushing for there to be a Department of Insurance regulatory officer placed in our area. There currently is none, and having one would help the Department of Insurance investigate claims of illegality. He even supported the idea of bail agencies paying a $10 fee on every posted bond that would be paid to the Department of Insurance to fund this. But his complaints and suggestions got nowhere.

So what exactly gets bail agents into trouble? Let’s examine the ways. Continue reading “Illegal Bail Practices”

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The Dog-Eat-Dog Bail Industry

Early in my research, I developed the crazy idea that bail agents might be willing to talk to me. Soon enough, this crazy idea became a reality. I began reaching out to bail agents and found them to be quite responsive. I met them wherever they were. Sometimes, that meant meeting them in the dimly lit back room of a local bail agency. Other times, it meant having a meeting in an agent’s elegant home, looking like it came right out of a Martha Stewart Living magazine (complete with a vintage pale-blue Corvette in the driveway).  I also met the demands of their busy schedules. One bail agent insisted upon multi-tasking during my interview, taking questions while on the phone with clients, whom he called “bro.” (Interesting conversation snippet: “Bro, don’t f*** up with me.”) Eventually, this agent had to cut our meeting short since he was slammed with work. As I exited this bail agency, slightly embarrassed and slightly offended, it all added up and hit me:  the bail industry is really competitive.

After all, there is a lot of money on the line. That pale-blue Corvette must be earned. Bail agents are paid through commission and have to hit monthly numbers. Every premium (the amount that is charged to a client) is split amongst the bail agency, the surety insurer, and the bail agent. Since 10% is the cap on premiums, a high volume of customers is one way to succeed as a bail agency. One way to achieve such high volume is to offer more flexible payment plans for clients. But doing this can make revenues go down because clients often default upon these plans. And in general, a high volume of clients is hard to achieve because of the fact that the number of bail agencies has increased over the years, creating a vast landscape of competition. Potential clients have a large number of bail agencies to choose from. The competitive nature of the bail industry and the money involved has even led some agents to turn to illegal bail practices.

It wasn’t always as competitive as it is now. One long-time bail agent told me that back in the 1970’s and 1980’s the different bail agencies were very cordial with each other. If two agents showed up to the court to post a bond, but then realized it was for the same client, they would work together to figure out who was called first.  Today, that sort of cooperation is hard to imagine. Almost all bail agents I talked to said that the bail business was fiercely competitive. In order to be a good bail agent, one had to be passionate, to love people and love what they do.  But they also had to have the motivation to work independently and bring in large volumes of business.

So how exactly do bail agencies compete with each other? In this post I will examine the four main ways: through location, advertisement, word of mouth, and discount rates. I think it is important to understand how exactly the bail bond industry operates, and how this affects our community, before we decide to make changes to the industry. Continue reading “The Dog-Eat-Dog Bail Industry”

The Santa Clara County Bail Market

The Santa Clara Valley was once known as the Valley of Heart’s Delight because of its abundance of orchards, flowering trees and plants. While the valley is no longer known for its natural abundance, it does have an abundance of money and industry for those lucky enough to harvest. One such industry is the Bail Bond Industry. Their clientele: individuals desperate to get out of jail. Their attitude: focused on service, yet fiercely competitive. Their environment: open 24/7, day and night, ready to respond to your call.

Bail agencies are fruitful in Santa Clara County. Based upon analysis of monthly data posted online, Santa Clara County bail agencies posted 7,599 bail bonds to gain inmates their freedom in 2015. To “post bond,” the bail agency does not actually give the court any money. Instead, a bail agency hands to the court a bond (a promise) that they will pay the full amount of bail if their client skips town and does not show up to court. The 7,599 promises made last year amounted to a grand total of $198,068,815. Given that most bail agencies charge their clients non-refundable premiums anywhere from 8-10%, bail agencies made an estimated $15,845,505 to $19,806,881 from premiums in 2015. Sweet, sweet freedom.

Take a look at how the amount of bail bonds changed each month in 2015:

Monthly Bond Amounts for Bail Agencies2

The highest total number of bail bonds was posted in December. Apparently, Mama does want you home for Christmas. Interestingly enough, in my chat with one bail agent, she pointed out that November and December were some of the most difficult months for bail agencies, because Santa Clara County has a policy of releasing those with non-violent charges during “Amnesty month” as a courtesy during the holidays. This widespread release of inmates reduces the need for bail agencies to get people out of jail. However, looking at the numbers above, bail agencies look like they make their best numbers in December.

Analysis of the data also tells us that the mean bail amount posted was $26,065. The median bail amount was $15,000. This amount represents that the most common story is as follows: An inmate has their bail set at $15,000. They cannot come up with that amount of money, and so they pay a $1,500 premium to a bail agency in order to be released from jail. This story only makes sense if one considers the high cost of living in the Bay Area. To put this $15,000 amount in perspective, the median household income in Santa Clara County is $93,854. The median gross apartment rent is $1,637, totaling an amount of $19,644 per year. Imagine your household having to come up with $15,000 to bail someone out of jail. It’s almost like renting a whole other apartment for your family, for an entire year. $15,000 is a lot for the average person in Santa Clara County. It is no wonder why someone would turn in desperation to a bail agency for help.

One critique of the bail industry is that it hurts low-income clients. It is theorized that one way in which this happens is that bail agencies do not bother posting bail for inmates with low bail amounts. It may be more profitable for them to work only with those with higher bail amounts. This theory seems consistent with the numbers. Of the 7,599 bonds posted in 2015, only 289 of them were for less than $2,000 (3.8%).  The largest bail amount posted by a bail agency was $1,500,000, and the smallest was $100. Of the bail agents I’ve interviewed thus far, many also said that they would either 1) not bother with those with extremely low bail amounts, or 2) take them on but charge a minimum fee. This is because bail agents must pay their surety insurer a fee for every bail bond issued, and it is just not profitable to take on those with low bail amounts.

But back to that lovely $19,806,881 in premiums that bail agencies made last year. Sure, you say, that sounds like a lot of money, but what about the money that bail agencies lose to forfeitures? Bail bond forfeitures happen when clients fail to appear to court and the bail agency recovery agents are subsequently unable to find the person within 180 days. Forfeiture of a bail bond means that the surety insurance company that a bail agency works under must pay the court the full bail amount. Most bail agents that I have interviewed have said that bail forfeitures are rare, since their bail recovery agents are usually able track down those clients who failed to appear in court. Recovery agents are so effective, in fact, that one independent bail agent told me a story where he had been trying to find a client who had failed to appear to court for 6 months. Feeling frustrated, he finally hired a bail recovery agent to help him out. That agent found his client within half a day. The numbers confirm that forfeitures are relatively rare. In 2015, there were only 189 forfeitures of bail bonds that amounted to $3,395,000.

So can we say that bail agencies had a “loss” of $3,395,000 in 2015? Well, not exactly. A forfeiture must be paid to the court right away, but then a surety company can reimburse itself by collecting money from those who co-signed for the bond in the first place. Many bail agents I interviewed emphasized the importance of co-signors in their business. Some agencies require co-signors for almost every bail bond. Depending on the reliability of the co-signors, there may be a need for multiple co-signors. And for high bond amounts, there may even need to be collateral. Once bail has been forfeited, and the surety company has paid the court the full amount of the bond, you can be sure that they will then turn to the co-signors to pay up.

But pay up how much? Most co-signors think that if they helped pay a premium of $1,000 on a $10,000 bond, then when forfeiture happens, they will have to pay only $9,000. Not so. But according to the bail agents I’ve talked to, when a forfeiture happens, the surety company comes after the co-signor for the full amount of the bond: the $10,000. Something to keep in mind if your family member calls you from jail to help bail him out.

So it looks like it’s pretty sweet to be a bail agency. They get people out of jail, they make money on premiums, and they never really have to pay for forfeitures.

Let’s turn to the bail bond agencies themselves. Who are they? 100 different bail agencies posted bail in Santa Clara County in 2015. Of these, only 5 bail agencies made up 76% of the entire market: Aladdin Bail Bonds, All Pro Bail Bonds, Bad Boys Bail Bonds, Bail Hotline Bail Bonds, and LE Bail Bonds. These agencies dominated not only in the total monetary amount of bonds posted, but also by the number of bail bonds posted. Aladdin Bail Bonds in particular is dominating, with 32% of the market. As you can see below, the percentages of bond amounts and number of bonds posted for the most part mirrored each other.

Number of Bonds by numbersNumber of Bonds by money amount

Looking at this landscape of bail agencies leads us to one street in particular: North 1st Street in San Jose. The top four bail agencies are located here—as are many other bail agencies. LE Bail Bonds is located only 2 miles away. North First Street is prime real estate for bail agencies because of its proximity to the Santa Clara County Jail, located on Hedding Street. See the map below:

map

Bewildered family members of the incarcerated can leave the jail and stumble upon an abundant valley of bail agencies. These agencies are ready for your business.  In future posts, I will look at how exactly defendants and family members find bail agencies to work with, the competition between these agencies, and how they advertise.

 

Rules, Regulations and Response: Looking at the Santa Clara County Bail Industry

The bail bond industry plays a prominent role in our criminal justice system; my research and writing will explore this industry within Santa Clara County. First, I will look at the local bail bond market. Who are the major players, and how much money is involved? Second, I will be researching the rules and regulations that bail bond agencies must follow.  What are the rules on solicitation of clients? How much can bail agencies charge? What laws must bounty hunters follow? And finally, I will be talking with our local Santa Clara County bail agents themselves. How do they choose their clients? How do they compete with one another? What changes would they like to see in our current bail system? My ultimate goal here is to summarize the current statutes and regulations governing the local bail bond industry, and find out how the industry follows and responds to those regulations. This is important, because before we can advocate for changing our for-profit bail bond system, we need to have a full picture of how that system operates, and what legal gaps need to be filled.

I’m Shauna Lord, a second year law student at Santa Clara University School of Law. I am interested in pursuing a career in social justice and public service. I am currently working as a law clerk at the Dependency Advocacy Center, which provides legal representation to indigent clients involved with the child welfare system of Santa Clara County.  Working at this non-profit organization, I see indigent clients who face racism, homelessness, drug addiction, and domestic violence. I am interested in the bail industry because of its effect on these vulnerable clients. I am excited to be a part of this project, and hope to learn what change is needed to further the cause of justice.