Existing law provides for the issuance of bail licenses under the jurisdiction of the Insurance Commissioner for bail agents, bail permittees, and bail solicitors. Existing law requires persons soliciting or negotiating the execution or delivery of an undertaking of bail on behalf of a surety insurer to be licensed as a bail agent. Existing law requires the commissioner to charge and collect specified fees for an application for a new or renewed bail license by a bail agent, bail permittee, or bail solicitor.

This bill would increase the fees for an application for a new or renewed bail license, as specified. The bill would require each surety insurer or bail permittee to pay a fee, not to exceed $10 per bail bond transaction. These fees would go to the Bail Investigation and Prosecution Fund, created as a special account in the Insurance Fund. The bill would provide that moneys in the Bail Investigation and Prosecution Fund be distributed by the commissioner, upon appropriation, to fund the reasonable costs incurred in regulating entities involved in the undertaking of bail, as specified. The bill would provide that if the total amount in the Bail Investigation and Prosecution Fund ever exceeds $8,000,000, then the commissioner shall reduce the amount of the assessment, as specified. The bill would authorize the commissioner to develop guidelines to implement or clarify these provisions. The bill would require the commissioner to provide an annual report on the departments Internet Web site including various information, as specified. The bill would make related legislative findings and declarations.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

Date of Hearing: April 20, 2016

ASSEMBLY COMMITTEE ON INSURANCE

Tom Daly, Chair

ABPCA Bill Id:AB 2449 (

Author:Eggman) – As Introduced Ver:February 19, 2016

SUBJECT: Insurance: bail license fees

SUMMARY: Quadruples bail agent license fees and imposes a $10 transaction charge on each bail bond to fund increased enforcement activity against bail agents. Specifically, this bill:

1. Increases the application fee to become a bail agent from $283 to $1,132.
2. Increases the fee to renew a bail agent license from $85 per year per appointment to $340.
3. Increases the application fee to become a bail permittee from $567 per year to $2,268.
4. Increases the renewal fee to become a bail permittee from $546 per year to $1,132.
5. Imposes a $10 fee on each bail bond to be paid by the surety or bail permittee, the proceeds to be deposited into the newly created Bail Investigation and Prosecution Fund (fund).
6. Allocates 70% of the revenue in the fund to the Department of Insurance to fund the cost of regulating the bail industry.
7. Allocates 30% of the revenue in the fund to grants to local prosecutors to support the investigation and prosecution of bail crimes.
8. Establishes application and oversight processes for the local prosecutor grants.

EXISTING LAW:

1. Requires surety insurers and bail agents to be licensed by the department.
2. Requires a bail agent to pay a fee every other year to renew his or her license.
3. Establishes industry assessments to fund consumer service and enforcement functions for automobile insurance and life and annuity insurance products.

FISCAL EFFECT: Undetermined

COMMENTS:

1. Purpose. According to the author, this bill would provide the DOI Investigation Division with the resources to eliminate a bail complaint backlog, more fully investigate illegal allegations of bail practices, and conduct education and outreach regarding bail by creating a Bail Education, Investigation, and Prosecution Fund within the Department. This fund would receive the proceeds from a $10/bond fee charged to all surety companies who transact bail in California. Thirty percent of these funds would be granted to District Attorneys via a competitive process and the DOI would retain the remaining seventy percent of the fund. Effective bail enforcement produces numerous benefits to the bail bond industry and consumers who purchase bail products. Consumers are protected from predatory tactics by any unscrupulous bail agents, while the bail industry benefits from improved consumer confidence. A well-regulated bail industry reduces business and transaction costs for industry members and it fosters competitive bail markets by ensuring a level playing field. The current resources of the Department and local District Attorneys do not allow for a comprehensive bail enforcement program.  Funds are needed to create an aggressive prevention, investigation, and prosecution program dedicated to eliminating illegal bail practices and to increase education and outreach on bail laws in California.
2. Bail. Once a person is arrested on a criminal charge and booked into a jail, the question is whether the accused remains in custody. Depending on many factors, an accused may be released to await court dates on his or her “own recognizance,” or “bail” will be set.  If bail is set, that means a specific amount of money, usually in the form of a bail bond, is required to be paid to the courts in order to secure the appearance in court of the accused.  Bail is usually determined by a “schedule” or the accused can have a bail hearing in front of a judge.  The bail schedule has pre-set amounts for a particular crime.  If a bail hearing is warranted, a judge determines the amount of the bail bond. If an accused does not wish to pay the full amount ordered by the court for release, or cannot afford the full amount, the accused may seek the services of a bail agent.  Under existing law, a bail agent must be solicited for bail directly by the arrestee, the arrestee’s attorney of record, or an adult friend or family member. The bail agent may post bail for the accused as a guarantee for the person’s appearance at mandated court hearings and for release from custody. 

In California, a bail agent is a person licensed and regulated by the department and will post the bond for the accused. A bail agent works with one or more bail surety companies, which essentially operate as an insurer backing the bail bond. In this instance, the bail agent takes responsibility for the accused making all court appearances and if the accused fails to appear, the bail agent will be the party responsible to pay the court the full amount of the bail bond.

Bail bonds may be negotiated in several ways. Most commonly, a bail agent charges eight or ten percent of the bail bond, commonly referred to as premium.  This is the bail agent’s commission. The accused does not get any of this money back unless the bail agent chooses to rebate monies back to the accused.  For example, on a $25,000 bail, the ten percent premium paid to the bail agent is $2,500.  In turn, the bail agent must pay the surety a percentage of the $2,500 based on the bail agent's contract with the surety insurer involved.  Collateral may take many forms, including a lien on house or a car.  When all appearances are made and the case resolved, the money provided to the court for bail will go back to the party that paid – either the accused or the bail agent. If the accused fails to appear for any court appearance at any time, that money is forfeited to the court and a warrant is issued for the arrest of the person.

1. Bail Agent Enforcement. DOI reports that the seriousness and amount of bail complaints have steadily increased in the past five years (from 62 complaints in 2010 to 238 complaints in 2015) and that DOI lacks the resources to allow for a comprehensive bail enforcement program. Common violations include soliciting bail in a prohibited place, bribery, money laundering, theft or embezzlement of collateral or premium, creating fake bail bonds, and receiving stolen property or contraband in lieu of premium collected. Bail complaints are investigated by sworn peace officers within DOI who investigate a range of cases. Bail comprises less than 2% of the insurance market, but it accounts for roughly 10% of the complaints to the DOI Enforcement Branch.

In August of 2015, the DOI arrested 31 bail agents in Santa Clara County. These arrests were the result of a multi-year investigation that uncovered bail agents rewarding jail inmates with illegal kickbacks for providing information about newly booked individuals in the jails. The investigation also produced allegations of using unlicensed individuals to transact bail and a bail agency knowingly employing a convicted felon as a bounty hunter (a violation of the Bail Fugitive Recovery Act). Of the 31 arrests in August, the DOI reports some final outcomes of three individuals who have pled guilty to misdemeanors with sentences including minor fines, community service, and probation. One individual was acquitted by a jury of all four felony counts charged. In addition to the criminal charges, the DOI suspended the licenses of the arrestees. However, each of those suspensions were overturned by an administrative law judge.

1. Bail Regulations. The DOI has regulations governing the conduct of bail agents. These regulations were last amended in 1977. Many in the bail industry assert that these regulations are badly out of date and need to be revised to provide clarity to the bail community. Members of the bail community articulated the need to revisit the nearly DOI bail regulations during the committee's hearing on AB 1406 (Gordon) last year (see note below on AB 1406).
2. Bond Fee. The DOI collects a range of fees from the people and companies it regulates to fund a range of regulatory, enforcement, and anti-fraud programs. These fees involve a direct connection between the payors and the regulated or the payors and the beneficiaries of the programs. The bond fee proposed in this bill is collected from the surety company to fund enforcement activity almost exclusively directed towards the misconduct of bail agents who are separately licensed and subject to their own independent regulatory program.

There is cause to question whether the per bond fee has the appropriate nexus between both the reasonable cost of regulation and between who pays the fee and the subjects of the increased enforcement activity contemplated by the bill. It is worth noting that enforcement costs in professional/occupational licensing programs are routinely paid for by license fees which are clearly treated as fees under Proposition 26. However, as the connection between those who pay the fee and who benefits from the proceeds of the fee is stretched, the prospect of the fee running afoul of Proposition 26 increases.

1. Revenues. The DOI estimates that the bill would generate around $3 million per year evenly divided between the license fee increases and the bond fee. DOI currently collects approximately $450,000 per year from bail license fees. This bill proposes a nearly seven-fold increase in spending above current levels and would likely provide the DOI with over $1,300 per year/per licensee to fund its regulatory program. While the DOI has provided data that show that the proportion of bail complaints they receive is larger than the proportion of bail agents in their population of licensees, the data do not support the need for a nearly seven-fold increase in resources. It should also be noted that the DOI has used other statutory authority to raise the license fees on bail agents by nearly 33% since 2013.

The DOI anticipates using this funding to dedicate seven sworn peace officers, one supervising sworn investigator, one attorney, and one supporting analyst to the attorney to bail regulation.  This staff would be responsible for:

1. Educating consumers, bail agents, sureties, prosecutors, and local law enforcement on bail issues and law.
2. Investigating and prosecuting unlawful conduct by bail licensees and unlicensed bail activity.
3. Responding to consumer inquiries and complaints related to bail transactions
4. Regulating and overseeing bail bond products, solicitation, and advertising directed toward consumers

While licensing acts generally have some criminal penalties, a primary purpose of establishing a licensing act is to provide the government with the means to impose administrative sanctions for misconduct. Bail is intertwined with criminal justice, but that does not mean that misconduct by a bail licensee is most effectively addressed by criminal sanctions. The DOI has had a very strong criminal focus to its regulation of bail licensees. This proposal appears to reinforce the focus on using criminal sanctions to enforce its administrative obligations.

1. Amendments. The Chair proposed a set of amendments to the author that would have doubled bail agent license fees for a two-year period (beginning in 2018) and required the DOI to report to the legislature by January 1, 2018 on what changes, if any, have been made to the 1977 regulations governing bail agents. These amendments were unacceptable to the author and sponsor.
2. Previous Legislation. Last year, this committee passed Assembly Bill 1406 (Gordon) which would have imposed a $15 per bond fee to fund increased bail agent enforcement activity by DOI and, like this bill, set aside 30% of the revenue to provide grants to local prosecutors to fund bail investigation and prosecution efforts. That bill was estimated to provide $2.5 million per year and was held on the Assembly Appropriations Committee Suspense File.

REGISTERED SUPPORT / OPPOSITION:

Support

Department of Insurance (sponsor)

Al Graf Bail Bonds

California District Attorney's Association

California State Sheriffs' Association

El Dorado County District Attorney

Kern County District Attorney

One Individual

Riverside County District Attorney

Santa Clara County District Attorney

Siskyou County District Attorney

Ventura County District Attorney

Opposition

All-Pro Bail Bonds

American Bail Coalition

California Bail Agents Association

Golden State Bail Agents Association

Analysis Prepared by: Paul Riches / INS. / (916) 319-2086