“Simple Economics”

In California, like in most other states in the United States, if you are arrested and sent to jail on criminal charges, a judge can set bail for your release, a price you must pay the court to get out of jail as you await trial. If you can’t pay the set bail amount, as is the case for the recipients of 175,000 bails in California each year, you can pay a bail bondsman instead. In California, a state with some of the highest bail costs in the country, there are more than two thousand of these bail agents to choose from.

Say the judge sets your bail at $5,000. If you were to pay the $5,000 up front to the court — and you attended all your court hearings — you would usually get nearly all of the $5,000 back once the case is resolved. But if you can’t afford the $5,000 to start with, you or a loved one can pay a bail bondsman a nonrefundable fraction of the bond, often around 10 percent (in this example, $500). Together California bail bondsmen collect $308 million in these fees annually.

This transaction typically involves signing a complex civil agreement and potentially posting collateral — like your house or car — to secure the loan. If you don’t appear in court, the bondsman can hire a bounty hunter to track you down or send debt collectors your way to chase the $5,000 you owe. The whole system, advocates say, preys on the stress and harms of incarceration and entraps people who are already prone to financial hardship.

“There are a lot of situations where folks are really stressed, worried about their loved ones’ safety, being rushed by the person they’re speaking to at the bail bond company,” said Nisha Kashyap, the racial justice program director at the Lawyers’ Committee for Civil Rights, which has litigated other cases against the bail industry in California. “It is a situation that is ripe for abuse.”

In many states, when a bail agent issues a bail bond, they’re required to have a surety company underwrite the loan, guaranteeing to the court that the bail will be paid if the defendant doesn’t show up to court. The bail agent and the surety company split the payment (the surety company typically takes the lion’s share), and the agent gives the judge a certificate indicating that the companies will ultimately be responsible for the $5,000.

In California and elsewhere, bail bond rates are typically set at a standard rate of 10 percent. This has been the case for decades; it’s generally taken as common sense.

But as the antitrust case argues, in California, this price doesn’t make much sense. It is rare that surety companies ever have to fork up bail to the court, because people tend to appear at their court dates, and if they don’t, judges frequently let commercial bail companies off the hook for payouts. That means that underwriting bail bonds is an extraordinarily low-cost enterprise. One surety company is quoted in court records as saying it had “not paid a loss on its . . . bail segments during the past 17 years.”

Furthermore, in California, bail agents are given wide leeway to set lower rates, if they choose. (This is not always the case in other states.) Legally, nothing is stopping a given bail agent from offering an 8 percent or 7 percent bail premium or an even lower rate. In a competitive market — given the low costs of the bail business — you might expect that bail agents would have an incentive to lower prices in order to compete with other bondsmen.

One surety executive is quoted in the court records as saying this explicitly: “If left unchecked, rampant premium discounting will result in the end of the bail bond business as we know it, to be replaced by a new model that properly reflects the proper balance of risk and reward.”

“Simple economics dictates it,” he concluded.

But the industry wasn’t left unchecked.

This is the argument of the class-action lawsuit: the reason that bail premiums have stayed at 10 percent in California and elsewhere is because of a disinformation and tooth-and-nail lobbying campaign by the surety companies, which are interested in keeping bail bonds high — fleecing consumers out of potentially billions of dollars as a result.

“Impending Attack”

In 2003, the biggest bail-bonding agency in the country was California-based Aladdin Bail Bonds. At the time, the company, which remains a major player in the industry, was owned by Robert Spencer Douglass, a bail bondsman.

Some years earlier, in the 1980s, California lawmakers had passed a law to encourage greater competition among the state’s insurance providers — long a troubled industry in the Golden State. Douglass believed that the law, which had succeeded in lowering the state’s exorbitant property and auto insurance rates, also allowed bail agents like himself to offer lower bail bond rates than the 10 percent “standard rate” that was set by the surety companies, though at the time this was not common practice.

Aladdin began offering discounted bail bonds, which “alarmed Aladdin’s competitors, who disparaged Douglass publicly and privately,” the antitrust suit claims. In 2003, in the face of increased pressure from the bail industry, Douglass sued state insurance regulators in order to prove that his practice of offering rebates was legal. In 2004, he won the case — making it clear that bail agents in California can offer the rates that they choose.

This was an inflection point. The state’s surety companies, foreseeing a sharp drop in bail bond premiums, launched a coordinated response. Douglass and Aladdin allegedly faced a harassment campaign. “We are making a list and checking it twice,” reads one letter reproduced in court records, purportedly from a surety trade association. “If we hear of any attorneys referring Aladdin Bail Bonds, you will be listed on our black list and never refer another client from any other bail bonds office.”

“2005 will not be a year when we, as an industry, can sit passively by while competitive forces continue to encroach upon our markets,” William Carmichael, president of American Surety Company, a major-bail bond insurer, and the chairman of the American Bail Coalition, a powerful industry lobbying group, wrote to other surety power brokers, according to court records. “Agents must be our industry’s eyes, ears, and mouths in recognizing and alerting all to the impending attack.”

A decade later, a bail agent named Chad Conley, who owned his own bail agency, allegedly faced a similar harassment campaign by the sureties after he posted on his website explaining that bail bondsmen could offer lower rates.

“Trust me after the good ol boys club came after my license for trying to save clients’ money I was forced to study this!” Conley wrote in a comment on his website, according to court records. “Most people don’t want you to know! They prefer price fixing and would prefer to have it back to only one rate of 10% period.”

Many details of the retaliation against Douglass and Conley are redacted in court documents, which surety companies have been fighting to keep from public view. But it’s clear that the campaign had an impact. Douglass, who had some prior legal trouble, lost his license in 2004. He sold his bail company to an industry attorney that year, who promptly adopted the same line as the surety companies: bail-bond premiums should be at 10 percent. Aladdin now claims to be the biggest bail company in the country.

Conley’s license, too, was later revoked.

“Defendants faced a choice: They could let competitive forces operate in their market, or they could collude to deprive California consumers of the competition that [state law] required,” attorneys in the case wrote. “Defendants chose collusion.”

The industry’s efforts intensified in 2016, when California insurance regulators opened an inquiry into the sureties, according to court documents, investigating whether their bail bond rates had been set too high. Various surety executives, including Carmichael, formed a “Bail Coalition Working Group” to address the investigation. Ultimately, state regulators took only limited action against two bail surety companies.

The industry’s trade associations, the case reveals, are critical to its efforts to keep premiums high. There are many: the Surety and Fidelity Association of America, the American Bail Coalition, the California Bail Insurance Group, the Golden State Bail Agents Association, and others. At trade association conferences — which often took place in Las Vegas or resort towns — they discussed the issue of bail agents offering discounts and formed action plans to address it, the court records allege.

The American Bail Coalition, in particular, has long been a powerful actor on policy issues across the country. The group spends hundreds of thousands of dollars lobbying on bail policy and has been a formidable opponent of the bail reform movement. It also has close ties to the American Legislative Exchange Council, an influential conservative policy incubator.

For Cherson with the Bail Project, the lawsuit is emblematic of an industry that has been allowed to operate unchecked for decades. “There’s zero oversight of this industry,” he said. While there might be licensure requirements for bail agents, he acknowledged, “there’s no oversight of outcomes and effectiveness.”

That’s despite years of evidence showing that cash bail is a harmful, dysfunctional system — one that allows affluent people to escape the harms of a long jail stay while trapping poor people behind bars and that encourages people to enter into coercive agreements with bail bondsmen.

This can be true regardless of whether or not you are ultimately convicted of a crime — as was the case for the plaintiffs in the California case. One of the women who brought the antitrust lawsuit bought a bail bond from Aladdin to get herself out of jail; she ultimately faced no criminal charges. The other purchased a bail bond for a relative. Criminal charges in that case, too, were ultimately dropped. Yet both paid what they say is an inflated bail premium price — and neither got their money back.

Now they’re hoping their antitrust case will provide them and others much-needed compensation.