In the past decade the commercial bail industry has come under attack from a variety of sources including pre-trial release, and state regulatory agencies for various reasons. During this time many remedies for both perceived and real issues have been proposed, but few have passed. During the past legislative session Connecticut made a series of comprehensive changes to bail insurance statutes that will have a major impact on the bail industry in Connecticut and perhaps across the nation. As an owner of BailCo LLC , DOI approved instructor for pre licensing and Vice President of the Bail Association of Connecticut I had the privilege and obligation to play role in the creation and ultimately the passing of 38a-660.
While I do not generally advocate the implementation of legislation to solve problems, in this case it was clear to almost everyone involved that a legislative solution was the only solution that would have the necessary impact on the industry. Our state has had many serious problems related to the bail industry for several reasons, lack of oversight, weak statues, economy and the inability of the industry to regulate itself to state a few. The state was faced with either eliminating the industry or passing legislation that would give the DOI tools needed to “clean up the industry”. Fortunately due to the overwhelming fiscal issues revolving around eliminating commercial bail and the overwhelming statistics that show viability of a when well regulated our industry was given another a chance and assisted in the passing of much needed legislation.
So what does 38a-660 consist of and more importantly what affect will it have on the industry? The new law impacts our industry in a number of ways, including, how and where we solicit business, what records must be kept, requiring monthly reports, creating penalties for failure to pay forfeitures, regulation of payment plans and creation of audits. While many of these elements existed prior to the passage of this law, they were vague and difficult to enforce. Even when the regulations where enforced the consequences for a violation where minimal for most. Put simply, it was a good business decision in the eyes of many to flout the prior regulations. Individually the new regulations seem innocuous enough, but when viewed as a whole they have the ability to change the landscape of commercial bail in Connecticut.
Solicitation is no longer allowed in courts or jails and advertising in those facilities is limited to a directory listing only. The goal of this section is to eliminate the unprofessional conduct of many bondsmen in these environments. This will be a particularly difficult section for the DOI to enforce based number of facilities that need to be monitored, unless they have the help of other state agencies. The bondsman is allowed to where shirts with logos so I’m sure we will see some embarrassing marketing attempts. I believe that this section is one of the weakest aspects of the law and will not have nearly as much impact as the remaining sections it’s more the tip of the spear. The bondsman conduction “business” in court and jails are a unique breed and I doubt many of them will let a law impede their methods.
Connecticut’s bondsmen have not typically been very good at record keeping, because until now there were no required documents. While some in the industry lack the business sense to maintain records properly others professed to have “lost” records when an issue arose. For many years unscrupulous bondsmen who came under scrutiny would claim not to keep records, and the Department of Insurance did little to incentivize those bondsmen to change their ways. Fortunately this had begun to change over the last few years because the Commissioner of the DOI decided to clean up the industry and appointed a very capable and willing investigator which began to use existing policy and law to force compliance.
While this increased aggressiveness had begun to have an impact, it also became clear that more specific records were needed, and this law does that very well. Requiring bondsman to maintain records will mean they need to be for more organized, professional and most importantly will begin the evidence trail for auditors and investigators. Simply not keeping them will result in significant enforcement actions.
Monthly and annual reports are now required by the bondsman and the sureties alike. These forms require attestations, signing under oath binding the bondsman or surety to its validity. If they are not submitted or the information is later determined to be fraudulent there will be significant consequence for both parties. These reports will make it very difficult to not charge the state mandated premium rates resulting in a significant decline in rebating over time while boxing in those who will attempt beat the system. These reports are one of many aspects of 38a-660 which force the surety to be accountable for those that that they appoint, a very significant change for Connecticut. Insurance Companies will no longer be able to turn a blind eye to bondsmen that produce “volume” without taking a significant risk themselves.
For years many bondsmen have failed to pay their forfeitures. Either because they don’t have the money, or think that they are entitled not to pay for some other misguided reasons and fight payment through frivolous litigation while still conducting business. Under the new regulations if the bondsman or surety does not pay of the forfeiture in the allotted time frame the surety and every agent writing for that surety will be barred from writing until the forfeiture is paid off. This provision makes the surety accountable for their appointee’s actions while providing a financial incentive to make sure that their appointees are following industry best practice in both underwriting and forfeiture management. Bondsmen who are insolvent or reckless with their underwriting will be an intolerable liability, and I predict that most sureties will inevitability come to the conclusion that they no longer want to be associated with these individuals.
Payment plans or credit bail have become common in the Connecticut’s bail industry and are often the method in which rebating occurs. I’m not a fan of payment plans but credit has become something our society seems to demand so they can’t be eliminated. The section regarding payment plans requires a specific deposit but most importantly it requires you to collect the entire premium and have the records to prove it. If the payments fall behind the bondsmen must take civil action. The record keeping and civil litigation will be a significant cost to the bondsmen and again ties the surety to actions of the bondsmen they appoint through reports. Once the industry digests the compliance issues regarding payment plans I believe you will see much less credit bail. Perhaps, relegating payment plans to larger bonds only. At the very least it has set the bar for the lowest amount to be deposited which will have an interesting effect with clients that attempt to negotiate a better deal.
Finally the new regulations call for audits of licensees by both their insurance company and a firm chosen by the state to audit select licensees. While the DOI has always had the authority to conduct audits, the combination of recorded keeping requirements, reports and introduction of a firm that specializes in finding money create a huge compliance issue for much of Connecticut’s bail industry. Many of the more experienced individuals within the industry feel that the audits will be insignificant and the DOI will not be able to fund them but I strongly disagree. Every license is required to provide a annual fee to fund the audits. Certainly there will not be enough money to audit every license every year but there is plenty of money for a significant number of audits depending on the scope of the audits. There are far too many records and reports to allow many of the methods of the past to keep the many of the companies operating on the fringe compliant. A bondsman or company that attempts to “cook the books” will be facing an auditor that’s trained to audit much more complicated industries then ours and the result of any serious violations being found will have huge financial and professional consequences for both the individual and surety.
38a-660 is not without flaw much like all statues they could be better but it is the law our industry must now contend with. This law will change the way the bail industry conducts business in Connecticut significantly over time and I believe for the better. January 31 is when the first of the new fees will become due many will probably not renew their licenses. Audits will most likely begin around the same time frame so the companies or bondsmen which think them don’t need to comply will begin to feel the weight of this law. As the rest of us attempt to comply many will realize that being accountable for “independent contractors” , as many of the bondsman are now employed, will become an unsavory arrangement fraught with peril. Independent contractors will find that being in compliance with this new law as an individual is not an easy or cheap proposition and will leave the business or become part of a larger company. Companies will be forced to have real employees along with the accountability and costs that come with them. The insurance companies will drop problem bondsmen and most likely attempt to replace them with new blood that doesn’t know the old ways and garner more premiums in the process. In all likelihood the numbers of licensees in the state will drop, perhaps by 50% or more.