The Tale of For-profit Commercial Bail and How it Has Gone Stale
| Publication year | 2020 |
| Author | By Alison Zoltowski |
By Alison Zoltowski*
The commercial bail bond industry is analogous to free pizza days at Planet Fitness. It's convenient for those involved, but at the heart of both practices lies something far more sinister. Pizza days are undoubtedly an anticipated perk for gym-goers; but the perk only complicates the situation. Why aren't healthier snacks offered? The commercial bail bond industry—at first glance—also appears to be a benefit. You pay and then you're released. But in actuality, it causes a plethora of complications for those entwined in the criminal-justice system.
The United States is plagued with mass incarceration—there are approximately 2.3 million people behind bars.1 Seventy percent of them are awaiting trial.2 This stems from the current cash-bail system—courts set cash bail without considering defendants' financial positions. It pampers the rich and punishes the poor. The commercial bail bond industry supports and endorses this system. The more defendants unable to post bail means that more commercial bail bonds will be sought—this results in more profit. There is urgency for extensive bail reform and the first step should be abolishing the $2.3 billion commercial bail bond industry.3
The commercial bail bond industry originated from arbitrarily set cash bail system that defendants couldn't afford.4 As because the United States was expanding west, defendants had fewer community ties.5 Thus, family and friends who could help raise bail were unavailable.6 As a result, more defendants were imprisoned.7 Entrepreneurs observed the increasing incarceration rates and saw an opportunity to profit.8 In turn, the commercial bail bond industry was born.
The first commercial bail bond company-The Old Lady on Kearny Street-was established in 1898.9 Two brothers began underwriting bonds for lawyers who drank at their father's bar.10 Initially, the brothers' services were free.11 However, when they learned that others were charging for bonds, the brothers began to charge.12 The following was reported by Time magazine:
The Old Lady helped San Francisco be what many a citizen wanted to be—a wide open town. She furnished bail by the gross to book-makers and prostitutes, kept a taxi waiting at the door to whisk them out of jail and back to work. But she was also a catalyst that brought underworld and police department into an inevitably corrupt amalgam.13
During the 20th century, the bail system was highly criticized and the heart of much debate. In 1927, a thorough study was conducted that revealed the system's discrepancies.14 Specifically, how it favored the wealthy.15 The study outlined the impact of cash bail on the poor.16 It noted that cash bail was only based on the nature of the offense without considering a defendant's financial resources.17 Additionally, the study found that the industry had become too powerful "'in the administration of justice,'" and that "'corruption and a failure to pay bond forfeitures plagued the industry.'"18 The study addressed problems in the bail system that are still predominant today.
Another intensive study occurred in 1961.19 Two men observed the financial discrepancies of cash bail.20 To combat the inequities, the men established the Manhattan Bail Project—an initiative that sparked bail reform in the mid-1960s.21
The Project suggested alternatives to cash bail.22 It hypothesized that defendants with strong community ties would return to court without imposing cash bail.23 And, if courts had access to this information, more defendants would be released on personal recognizance.24 In conducting the study, thousands of defendants were given questionnaires.25 The questionnaires focused on the following: employment, community ties, and criminal history.26 Defendants who received high scores on the questionnaires were recommended to the court for release on their own recognizance.27 Overall, 3,505 defendants were recommended and released: only 50 defendants failed to appear to court.28
The Project led to two findings. First, the majority of defendants were imprisoned due to an inability to post minimal bail.29 Second, defendants released on personal recognizance were highly likely to appear to court.30
The Project led to the Federal Bail Reform Act of 1966.31 The Act's purpose was to ensure that defendants—despite their financial resources—were not "detained pending their appearance to answer charges . . . when detention serves neither the ends of justice nor the public interest."32 Although the Act didn't prohibit cash bail, it favored release on personal recognizance.33 When defendants were released, conditions were imposed to safeguard court appearance.34 Appropriate conditions were based on the following: community ties, the offense, financial resources, and evidence against the defendant.35 Within five years, more than a dozen states reformed their laws to conform with the Act.36
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Under the 1966 Act, courts only questioned the probability that a defendant would appear to court.37 And aside from capital offenses, it didn't consider whether defendants posed a danger to the community.38 As such, the Federal Bail Reform Act of 1984 was enacted to respond to "the alarming problems of crimes committed by [defendants] on release."39 The Act permitted pretrial detention when "no condition or combinations of conditions of release [would] reasonably assure . . . the safety of any other person and the community."40 Interestingly, the Act replaced the word 'bail' with 'release'; this was done to prevent the confusion that bail meant money.41
The 1966 and 1984 Acts mark the two waves of bail reformation in the United States. Despite the reformation efforts, the commercial bail bond industry continued to strengthen. This suggests that current bail reformation—to be successful—needs to target reducing reliance on the industry.
After an arrest, a defendant is arraigned, and bail may be set.42 In the majority of jurisdictions, there are only two ways to make cash bail: post it yourself, or pay a commercial bail bondsman.43 In 2009, only 38% of defendants in urban cities could post bail; sixty-two percent of defendants were either imprisoned or paid a commercial bail bondsman.44 This statistic is not surprising considering that the median cost of cash bail for a felony is $10,000.45
Commercial bail bondsmen perceive defendants as potential business transactions and will not accept everyone.46 Fixated on profit, bondsmen will generally decline defendants with cash bail under $2,000.47 If deemed profitable, defendants are forced to pay a nonrefundable 10% security: even if found innocent.48 Collateral is demanded if the bondsman believes that the defendant poses a high flight risk.49 Furthermore, another nonrefundable 10% security is required if a defendant's case is still pending after a year.50 A co-signer is also required to obtain a commercial bail bond.51 The co-signer agrees to be held responsible for the full bail amount if the defendant fails to appear for court.52
A defendant is also required to enter into a contract with the bondsman.53 Because the majority of these contracts have hidden terms that often require defendants to forfeit several personal liberties, it gives bail bond companies expansive power over them.54 It requires disclosing sensitive personal information: for instance, credit history, employment history, and motor vehicle registration history.55 This is necessary so that the bondsmen can track the defendant. The contract also requires the defendant to agree to additional conditions and incurred fees.56 For example, a defendant may agree to be subjected to warrantless searches, vehicle tracking, and surveillance.57
After paying the security and entering the contract, the bondsman gives the court a bail bond.58 If the defendant appears for court, both the bail bond and contract are terminated.59 Again, no refund is given. If a defendant fails to appear, the bondsman is responsible for locating the defendant and returning him to court.60 Otherwise, the bondsman is liable for the full bail amount.61 Bondsmen usually hunt for the co-signer to recover from this loss.62
To operate, bail bond companies must be insured by a commercial insurance company.63 There are 30 insurers that underwrite all bail bonds-but fewer than ten cover the $14 billion worth of bail bonds issued each year.64 Insurance companies receive a 10% cut from every security paid.65 This money is put into a reserve that protects against potential loss: which rarely happens.66 An insurance company only has to cover a loss if a bondsmen goes out of business.67 Therefore, the insurance companies are running a steady-profit, no-risk business.
The insurance companies' profits are exemplified by observing some of the top ten's revenues. The most profitable company is Tokio Marine America.68 Located in Japan, Tokio Marine's yearly revenue is around $40 billion.69 In Canada, Fairfax Financial earns roughly $9.5 billion a year.70 In the Bermuda Islands, R&Q's revenue is approximately $100 million a year.71 Clearly, multinational insurance companies dominate the industry.72
In 2007, Broward County, Florida, was tormented by mass incarceration—the jail population was deemed unconstitutional.73 Rather than building a new jail, the County doubled its budget for pretrial release services.74 As a result, the County was able to close an existing jail's wing: taxpayers saved $20 million a year.75 But the pretrial release program hindered the bail industry's business.76 In attempt to restore its profits, the industry donated thousands of dollars to county-commissioners' campaigns.77 It also hired lobbyists who encouraged commissioners to pass an ordinance decreasing the number of defendants that were eligible for pretrial release.78...
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