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Booker, Brown Challenge Bail Bond Insurance Firms on Abusive Policies, Practices

In letter to 22 large firms, Senators urge action against abusive bail bond providers

August 7, 2018
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WASHINGTON, D.C. - U.S. Senator Cory Booker (D-NJ) and Banking Committee Ranking Member Sherrod Brown (D-OH) questioned insurance companies on their awareness of and involvement in the unjust, abusive, and oftentimes illegal practices of the bail bond providers that they insure. In a letter sent Friday to the more than 20 firms currently receiving the most revenue from the underwriting of bail bonds issued in the United States, the Senators urged the firms to address the unfair and exploitative practices of bail bond providers, which disproportionately affect people of color and low-income individuals.

“Every year, bail bond agents across the country are estimated to bring in more than $2 billion dollars from bond premiums and fees,” the Senators wrote in the letter. “As a result of these costs, consumers in the bail industry frequently find themselves trapped in a cycle of debt and fees related to their payments, often for long after the original charges with the courts have been resolved. In light of these disclosures, we are concerned that many of our nation’s insurance companies may be pursuing profits at the expense of economic security for vulnerable families and the goals of public safety.”

Booker and Brown asked the firms a series of questions about the amount of revenue generated, how the firms monitor the bond providers they back, and whether or not mechanisms are used to hold bail agents to a fair and legal standard. They also urged the firms to take action against abusive bail bond providers and to help consumers better understand their legal rights when it comes to bail transactions.

Booker, a member of the Senate’s Judiciary Committee, has been a leader on criminal justice reform, dating back to his time as a tenant lawyer, City Council member, and Mayor of Newark, where he saw the effects of the broken justice system first-hand. In the Senate, he has introduced bills to end juvenile solitary confinement, help formerly incarcerated individuals find employment, reform the way women are treated behind bars, and end the federal prohibition on marijuana.

Full text of the letter is below. It was sent to the following 22 firms:

Palmetto Surety Company

Tokio Marine America

HCC Surety

American Contractors Indemnity Company

United States Surety

US Specialty Insurance

Fairfax

Crum & Forster Insurance

Seneca Insurance

The North River Insurance

U.S. Fire Insurance

Randall & Quilter

Accredited Surety & Casualty

Endeavour Capital

Seaview Insurance

Bankers Financial Corp / Bankers Surety

IAT Insurance Group

AIA/ Allegheny Casualty Company

IFIC Surety Group

Financial Casualty & Surety

Lexington National Insurance Company

American Surety Company

Dear [           ]:

We are writing to request detailed information about [company’s] policies and practices with respect to your underwriting of bail bond contracts.

Every year, bail bond agents across the country are estimated to bring in more than $2 billion dollars from bond premiums and fees. While people of means receive the full amount of their posted bail back when their cases conclude, payments made by consumers in the commercial bail market are kept by the industry—even when charges are dropped or they are determined to be innocent. As a result of these costs, consumers in the bail industry frequently find themselves trapped in a cycle of debt and fees related to their payments, often for long after the original charges with the courts have been resolved.

Further, recent studies and investigative reporting, including by the New York Times, suggest that the American bail industry is rife with unfair and abusive practices that harm low-income consumers and undermine the goals of our criminal legal system.[1]  Those practices—documented in public reports and litigation around the country—include charging undisclosed or illegal fees; misleading consumers about the terms of their bail agreements or about their legal options; engaging in harassing and abusive collection practices, including by making threats to send arrestees back to jail without a legal basis to do so; forcing bail bond cosigners to turn over property that was used as collateral in cases where the arrestee complied with the terms of the bail; and threatening or apprehending individuals in order to coerce them to make premium payments.  Many of these practices violate federal and state legislation designed to protect consumers. But with patchwork oversight and data collection in the states and courts, we are concerned that these harmful practices may escape scrutiny and accountability.

In most states, bail bonds are underwritten by large corporate insurers who contract with bail agents to receive a share of consumers’ payments.  Even though their risk in the transactions is limited and their role largely hidden from public view, these corporations play an active role in our commercial bail system.[2] The practices, policies, and actions of bail surety companies have wide impact on agents, consumers, and the justice system—but are largely unseen.[3]

In light of these disclosures, we are concerned that many of our nation’s insurance companies may be pursuing profits at the expense of economic security for vulnerable families and the goals of public safety.  We are particularly concerned that the insurance industry—which has received hundreds of millions of dollars in revenues related to bail bond insurance—is not doing all it can to ensure that the bond agents with whom they contract are complying with the law.

According to a recent report by Color of Change and the ACLU, your firm is one of the largest insurers that is currently underwriting significant number of bail bonds issued in the United States. To better understand the steps your institution is taking to ensure that the bond agents with whom you contract are not engaging in these abuses, we kindly ask that you respond by September 3rd to the following questions:

Information about your firm’s underwriting of bail bonds

•      How much revenue did your institution generate from bail bond premiums in each of the past five years?

•      What percentage of bail premiums do you charge bail agents for underwriting? How is this rate set, and does it vary by jurisdiction?

•      Do you require bond agents to pay into any bail-up funds or similar reserve schemes?

•      Are underwriting fees based on the collected amount or the total owed amount for financed premiums? Do you collect your underwriting fees at the commencement of the transaction, upon final payment, or in some combination?

•      What guarantees are made in your contracts to be responsible for any forfeitures? How many times in the past five years have you paid out on forfeited bail bonds?

Information about steps your firm is taking to monitor for abuses and legal violations

•      What efforts has your company made to ensure fair and legal practices by bail agents with whom you contract and work?

•      What mechanisms do you use to train, direct, or monitor the practices of bail agents that you insure?

•      Do you have any policies requiring bond agents to affirm that their financing, collection, surrender, and other practices are in full compliance with applicable laws?

•      What actions do you require the bond agents with whom you contract affirmatively take to ensure that consumers of bail bonds contracts understand the terms to which they are agreeing?

•      As far as you are aware, have any bond agents with whom you have contracted been sued for any misconduct, business practices, or execution of contracts?  How many have been subject to administrative or enforcement action? What were the outcomes? What action, if any, did you take in relation to the named agents?

•      How many times, and in what jurisdictions, have you been named as a defendant in litigation, or a party in an administrative or enforcement action, pertaining to your role as bail surety?  What were the outcomes?

•      How many times in the past five years have you cut relations with an agent because of reported abusive practices, and why?

Information about alleged abusive practices

•      What fees do you allow the agents with whom you contract to include beyond the bond premium (e.g., for installments, additional "services," or otherwise)?  

•      What steps are you taking to monitor how often and on what terms agents use installment contracts?

•      Do your policies allow bail agents with whom you contract to surrender defendants for falling behind on financed bail payments?  Under what circumstances, if any, do you require or encourage agents to surrender arrestees? What steps are you taking to monitor whether agents with whom you contract have ever surrendered individuals for this offense?

•      Do any of your contracts—or addendums, contracts used by bail agents, and similar documents—allow supervision requirements (like electronic monitoring or drug testing), beyond what is required by the court?  Where your agents require such terms, do they report it to you? Do you ever require, through your contracts and interactions with bail agents, that those terms be imposed on consumers? Where they collect for “supervision services,” is any portion of these funds shared with you?

•      Do you have any policies with respect to requiring family members or friends to co-sign contracts with the bail bond agent establishing that they will be responsible for paying the full bail amount if the person does not appear in court or violates the terms of the contract?

•      Do you have any policies or guidance regarding retaining collateral? Do you have any policies with respect to requiring the bail agents with whom you contract to require people and their families to put up property and other assets as collateral? Do you track any information regarding the retention or seizing of collateral by your company or any licensed agents?

•      Do you have any policies requiring mandatory arbitration?

•      How many times over the past five years has your company been a party to administrative action or litigation to contest, or object to the forfeiture of a bond or demand for payment on a bond?

Information about your firm’s willingness to consider affirmative steps to ensure compliance and educate consumers

•      Do you have provisions in your contracts with agents that prohibit certain practices—for example, the use of financed premiums or incarceration for failure to pay on installment contracts? Would you consider including these or similar terms going forward?

•      Will you commit to ending relations with agents who are credibly accused of abusive practices?

•      Will you consider taking specific actions to ensure that consumers understand their legal rights in the commercial bail transactions that your firm underwrites, in addition to what you currently are doing? What actions will you take?

Sincerely,

                                                             

Cory A. Booker                                                                   Sherrod Brown

United States Senator                                                          United States Senator