BILL ANALYSIS Ó
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 1406
(Gordon) - As Introduced February 27, 2015
SUBJECT: Insurance: bail license fees
SUMMARY: Imposes a $30 fee on all bail transactions to fund
enforcement efforts by the Department of Insurance (department).
Specifically, this bill:
1)Requires a surety insurer to pay a $30 fee on all bail
transactions.
2)Creates the Bail Investigation and Prosecution Fund (fund)
within the Insurance Fund to receive bail transaction fee
revenue.
3)Permits the department to spend the proceeds of the bail
transaction fee as follows:
a. 70% shall be used to pay for investigating and
prosecuting unlawful conduct by bail agents and
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responding to consumer complaints.
b. 30% shall be used to provide grants to local
prosecutors for investigating and prosecuting bail cases.
4)Establishes rules for the grant program broadly consistent
with other local prosecutor grant programs administered by the
department.
5)Requires the Insurance Commissioner (commissioner) to reduce
the bail transaction fee if the fund has a balance exceeding
$8 million.
6)Allows the commissioner to adopt regulations regarding the
disposition of excess revenues in the fund.
7)Exempts those regulations from the Administrative Procedures
Act (APA).
8)Requires the commissioner to provide an annual report
regarding its bail related enforcement actions.
EXISTING LAW:
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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)Requires state agencies to comply with the APA when adopting
regulations.
4)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, the bill is motivated by
the growth and seriousness of bail complaints received by the
department. The department's resource limitations have
prevented the creation of a comprehensive bail enforcement
program. Funds are not only needed to create an aggressive
prevention, investigation, and prosecution program dedicated
to eliminating illegal bail schemes, but also to educate and
increase outreach on bail laws in California. This bill would
impose a fee of $30 per bond transaction to all surety
companies transacting bail in California. Thirty percent of
the funds would be distributed to city attorneys and county
district attorneys and the other seventy percent would be
allocated within the department to investigate, enforce, and
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prosecute illegal bail activity and code violations. Similar
programs are in place for automobile insurance and
investigations related to life insurance and annuity products.
Imposing this assessment would provide dedicated resources to
investigate bail-related complaints and prosecute those cases
that rise to the level of criminal conduct. It would also
better enable the Department to regulate and oversee bail
products and would also assist city attorneys and county
district attorneys in investigating and prosecuting surety
insurer and bail cases.
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
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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 agents contract with the surety insurer involved.
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.
3)Industry Assessments . The department operates similar
programs funded by industry assessments for automobile
insurance and life and annuity products. As with this bill,
an industry assessment supports departmental operations costs
incurred regulating its licensees and providing grants to
local law enforcement agencies to cover the cost of
investigations and prosecutions related to licensee conduct.
The department is pursuing an industry assessment for bail
agents because of the limited size of the bail agent
population. With about 3,000 bail licensees it is impractical
to fund the regulatory program exclusively with licensing
fees. The department reports an increase in the number and
severity of consumer complaints regarding bail licensees and
believes that more resources are needed to respond to the
problem. While no formal fiscal estimate has been completed,
the bill would likely produce approximately $5.2 million per
year in added revenue for the department, of which
approximately $3.6 million per year would go to support its
bail licensee enforcement program (the remainder being
provided as grants to local prosecutors). That is nearly ten
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times the total annual revenue the department collects from
its bail licensees currently through licensing fees and a
six-fold increase in the department's enforcement resources
for its bail program. Such an increase would amount to
approximately $1,200 per year for every licensed bail agent in
California.
4)Regulations . The rulemaking portion of the APA was
established to provide a common set of rulemaking procedures
and standards for state agencies in California. These
standards are designed to provide the public with a meaningful
opportunity to participate in the adoption of state
regulations and to ensure that regulations are clear,
necessary and legally valid. The standards include
requirements that agencies proposing regulations provide
reasonable notice of their proposals and consider the comments
submitted by the public.
5)Suggested Amendments. The author should consider the
following amendments to the bill:
a. Reduce the assessment to $15. A $30 fee would
result in a massive increase in funding for bail
enforcement activity that is dramatically out of scale
for the size of the bail agent population. A $15
assessment would provide considerable additional
resources to both the department and local prosecutors,
but be more appropriately scaled to the number of bail
agents.
b. Delete the exemption from the APA on page 6, lines
27-31. The regulations contemplated by this section are
routine and no justification for the exemption has been
provided.
REGISTERED SUPPORT / OPPOSITION:
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Support
Department of Insurance (sponsor)
Alameda County District Attorney
California District Attorneys Association
California State Sheriffs Association
City Attorney of Los Angeles
Northern California Fraud Investigator Association Anti-Fraud
Alliance
Peace Officers Research Association of California
Santa Clara County District Attorney
Numerous individuals (including individual bail agents)
Opposition
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American Bail Coalition
California Bail Agents Association (CBAA)
Golden State Bail Agents Association (GSBAA)
Professional bail Agents of the United States (PBUS)
Numerous individuals (including individual bail agents)
Analysis Prepared by:Paul Riches / INS. / (916) 319-2086