BILL ANALYSIS Ó
AB 2449
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Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 2449
(Eggman) - As Introduced 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
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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:
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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
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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.
3)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
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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.
4)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).
5)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
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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.
6)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.
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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:
a) Educating consumers, bail agents, sureties,
prosecutors, and local law enforcement on bail issues and
law.
b) Investigating and prosecuting unlawful conduct by
bail licensees and unlicensed bail activity.
c) Responding to consumer inquiries and complaints
related to bail transactions
d) 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
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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
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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
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