Relates to bail bonds

This bill would amend the Insurance Law to enable the Department of Financial Services ("DFS") to more effectively regulate licensed bail agents.

Summary of Provisions:

Section 1 of the bill would amend Insurance Law § 6801(a) and (b) to make technical changes and would amend § 6801(c) to define "insurer," "bail agent," "bail bond," "criminal proceeding," "principal," "collateral," and "indemnitor."

Section 2 would amend Insurance -Law § 6802(a) to provide that any person, firm, corporation, or other entity, or any officer or employee thereof, that does a bail business without a license will be subject to a penalty not to exceed $1,000 for each transaction, and also would make technical changes to subsections (d) and (e).

Section 2 would also amend Insurance Law § 6802(k) to provide that the Superintendent of Financial Services ("Superintendent") may revoke or suspend a bail license if the licensee or any sublicensee has: (1) obtained or attempted to obtain a license through misrepresentation or fraud; (2) improperly withheld, misappropriated, or converted any monies or properties received in the course of business in New York State or elsewhere; (3) had a bail agent license or its equivalent revoked in any other state, province, district, or territory; (4) forged another person's name to an application for a bail bond or any other document related to bail transactions; (5) failed to comply with an administrative or court order imposing a child support obligation; (6) failed to pay state income tax or comply with any administrative or court order directing the payment of state income tax; or (7) failed to return collateral to an indemnitor in accordance with Insurance Law § 6812.

Section 2 would also amend the title of Insurance Law § 6802 to remove the term "professional bondsmen" and replace it with "bail agents" and make other technical changes.

Section 3 would amend the title of Insurance Law § 6803 to remove the word "bond."

Section 4 would amend Insurance Law § 6804(b) to state that a person or corporation may not charge, collect, or receive any fee or consideration from an indemnitor other than the premium based on rates in current use, except provided in § 6804(c). Section 4 also would add a new Insurance Law § 6804(c) to provide that a bail agent may charge an indemnitor a maximum fee of $100 for the apprehension or surrender of a principal in a criminal proceeding unless Insurance Law § 6812(c) applies.

Section 5 would add new Insurance Law §§ 6806 through 6813. Section 6806 would add new provisions with respect to revoked licenses. Section 6807 would require that each place of business, including any headquarters location and any satellite office, established by the holder of a bail agent license issued pursuant to Insurance Law 6802, be under the supervision of one or more persons licensed under such section. Section 6808 would provide that a holder of a bail agent license must inform the Superintendent by a means acceptable to the Superintendent of a change of address within 30 days of the change. Section 6809 would provide that every holder of a bail agent license must notify the Superintendent upon changing his, her, or its legal name. Except for an individual licensee's own legal name, a licensee may not use any name in conducting a business regulated by Insurance Law Article 68 that the Superintendent has not previously approved.

Section 6810 would provide that a holder of a bail agent license must report to the Superintendent any administrative action taken against the licensee in another jurisdiction or by another governmental agency in New York State within 30 days of the final disposition of the matter. The report must include a copy of the order, consent to the order, or other relevant legal documents. In addition, the licensee must report to the Superintendent any criminal prosecution of the licensee taken in any jurisdiction within 30 days of the initial pretrial hearing date. The report must include a copy of the initial complaint filed, the order resulting from the hearing, and any other relevant legal documents.

Section 6811 would provide that the terms "insurance. agent" and "insurance producer" include a bail agent for the purposes of Insurance Law § 6812.

Section 6812(a) would provide that every bail agent is responsible in a fiduciary capacity for all funds, collateral, or anything else of value received or collected as a bail agent. Collateral received by a bail agent must be held in the insurer's name. Prior to any forfeiture of bail within the meaning of Criminal Procedure Law § 540.10, a bail agent may not mingle any such funds, collateral, or other things of value with the bail agent's own funds or with funds held by the bail agent in any other capacity.

Section 6812(b) would provide that a bail agent may not use collateral for personal benefit or gain. All collateral received from an indemnitor by a bail agent or an insurer must be returned to the indemnitor in the same condition as received no later than 30 days after receipt of notice of exoneration of bail, unless there is a forfeiture of bail within the meaning of Criminal Procedure Law 540.10, or unless Insurance Law Article 68 or regulations promulgated thereunder specifically authorize deductions from collateral. If a bail agent fails to return collateral to an indemnitor, then the insurer will be liable for such collateral.

Section 6812(c) would provide that where there has been a forfeiture of the bail bond, a bail agent or insurer may charge an indemnitor the actual and reasonable costs necessary to apprehend and surrender a principal in a criminal proceeding.

Section 6812(d) would provide that an insurer must promptly refund the entire premium charged for a bail bond when the insurer had no liability under the bail bond because the principal in the criminal proceeding does not come under the jurisdiction of the court to which the defendant is returnable, the principal is not released from custody, or the bail bond is not posted with the court.

Section 6813(a) would provide that upon issuance of a bail bond, the bail agent shall provide to the principal and, if applicable, to the indemnitor, an informational notice that must include: a statement noting with particularity the restrictions, if any, placed on the principal as a condition of the bond; a statement of the bail agent's authority relating to the cancellation of the bond and recommitment of the principal; the name, address, telephone number, and website address of DFS for complaints or inquiries; and such other information the Superintendent may require.

Section 6813(b) would provide that any bail agent that surrenders or recommits a principal shall provide the principal with a statement of surrender. The statement must be signed by the bail agent and state the reason for the surrender. A copy of the statement must be provided to the court at the time the principal is surrendered and a copy maintained by the bail agent in the principal's file for at least six years from the date of surrender.

Section 6 would state that the bill takes effect the first of January next succeeding the date on which it shall become law and that effective immediately, the Superintendent may promulgate any rules and regulations necessary for the implementation of this bill on its effective date.

Existing Law:

Insurance Law Article 68 provides the statutory requirements applicable to the regulation of bail agents. Under current law, there is neither a prohibition nor a restriction on a licensed bail agent employing a person whose bail agent license has been revoked by the Superintendent, and there is no prohibition on a person whose bail agent license has been revoked from becoming a shareholder in a corporation that is licensed as a bail agent. Consequently, bail agents whose licenses have been revoked have remained in the bail business.

There also is no statutory fiduciary responsibility imposed on licensed bail agents with respect to collateral they hold or a statutory prohibition on mingling collateral money with other funds. The absence of such a responsibility imposed by statute is likely a factor in the large number of complaints involving the misuse of collateral money.

In addition, nothing requires that a place of business established by the holder of a bail agent license be under the supervision of a person licensed as a bail agent. This has led to licensed bail agents having places of businesses that are under the supervision of unqualified people. There also is nothing that requires a licensed bail agent to timely report to the Superintendent administrative actions taken against the bail agent by other governmental agencies,

or a criminal prosecution taken against the bail agent. This has led to bail agents being subject to administrative actions by other New York State agencies or by other states, or being prosecuted for serious crimes, without the Superintendent being informed.

Article 68 does not prohibit a licensed bail agent from conducting business in a name other than the agent's own legal name, and does not require a bail agent to obtain the Superintendent's approval when using any other name. This has led to licensed bail agents using multiple names, making it difficult for consumers to complain to DFS and for DFS to process the complaints.

Legislative History:

This bill is new.

Statement in Support:

Between 2005 and 2013, there has been a significant increase in the number of complaints made to DFS against licensed bail agents, including allegations of misuse of collateral money posted with bail agents, the charging of improper fees, and fraud. Currently, the Superintendent's ability to effectively regulate the bail industry and to protect consumers has been hindered by certain deficiencies in Insurance Law Article 68, which governs bail agents.

This bill would address the deficiencies in Insurance Law Article 68, make it more analogous to Insurance Law Article 21, which governs insurance producers, and enable the Superintendent to more effectively regulate the bail industry and protect consumers. Specifically, the bill would clarify certain issues that Article 68 currently does not address with specificity. Unscrupulous licensed bail agents have exploited this lack of specificity, which has resulted in harm to consumer. The lack of specificity has enabled bail agents to create excuses for failing to return premium or collateral, or failing to timely return collateral.

The issues that this bill would clarify include: whether fees may be charged incidental to the posting of a bail bond in addition to the premium; the permissible fees that a bail agent may charge for returning a defendant to court custody when there has not been a forfeiture of bail; whether any premium or other compensation may be charged if a bail bond is posted but a defendant is not released from court custody; whether a bail agent may charge any fees if a bail bond is not posted; and whether there is a specified time period by which a bail agent or insurer is required to return collateral after a criminal case is completed.

This bill, together with subsequent regulations, would provide greater protection to consumers and raise the standards of integrity in the bail industry.

Budget Implications:

None.

Local impact:

None.

Effective Date:

This bill would take effect on the first of January next succeeding the date on which it shall become law, and that effective immediately, the Superintendent may promulgate any rules and regulations necessary for the implementation of the bill on its effective date.