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Thursday, February 12, 2009

Guest Letter: Opposition to Increasing the CD Assignment

Note: The following is a guest commentary submitted by Michael Thomas, a state certified trainer for initial education and CE. Thomas is also a general agent in Missouri.

First of all let me explain to those who are not familiar with the current system, what happens when a general agent puts up his or her $10,000.00 with the state. The general agent goes to the bank and buys a CD in his or her name in the amount of $10,000.00. The general then completes a General Bail Bond Agent Assignment form MO 375-0525. This form assigns the money in that CD to the State of Missouri. The bank then completes an Acknowledgement of Assignment form MO 375-0527. These forms are then sent to the State of Missouri and at that point the General agent can no longer touch the money until he has surrendered his license and his liabilities have cleared. This money can not be touched by the General Agent to pay day to day forfeitures. The DIFP is the only entity that can draw money from the CD, other than the interest it earns, as long as the Assignment is in effect.

Similarly, if a general agent were required to put up a $5,000.00 CD for each agent working under his or her authority there would be an Assignment executed for each of those agents. Again the general agent would not be able to touch that money until the Assignment is released by the state. So regardless of what your contract with the general says the money isn’t going to be released until the state allows it.

A common misconception is that this money is routinely used to pay forfeitures. That just isn’t the case. By the time this money is used by the state to pay forfeiture, the General Agent has been shut down for at least 30 days and may in fact be out of business. The courts and the DIFP expect the General Agent to pay forfeitures with other monies long before it gets to a point where the state has to take it from the CD.

Most people try to keep their money working for them by investing in stocks and bonds, CD’s, real estate, and various business ventures. CD’s have a very poor rate of return, presently 1 to 2 percent at best and is typically an investment that older individuals would use to safeguard retirement money that has already been made. Most of us in the business are younger and are not to the point in our investment portfolios where we want our money to be stagnate. If the amount of assignment is raised from $10,000.00 to $50,000.00 this money would essentially stop working for us. And since this money is used by the State as the final solution and generals can’t touch it in the event of a forfeiture, each general agent would still have to have a significant amount of cash on hand or readily accessible to pay the day to day forfeitures.

All of us are disgruntled by the influx of people into this industry and yes it is affecting our income. Not so much because of the numbers of new bondsmen but because of irresponsible bail writing. This business has always been able to separate the wheat from the chaff but it takes a little time for this to occur. Irresponsible bondsmen go broke pretty quickly and eliminate themselves. But nevertheless they adversely affect us while they are in business. If you look at the liability they incurred in the 18 to 24 months that it took to get themselves into trouble the amount is staggering. Sometimes this liability can be in the millions of dollars. Raising the Assignment from $10,000 to $50,000 would not stop these people from getting into the business and would not do anything to curtail irresponsible bond writing.

An example I use in my classes to illustrate my point follows, If a small county has 5 bondsmen in the county and typically the court averages about 5 criminals with bonds of $20,000 each month, it follows that if all things are equal, each of those five bondsmen has a fair chance of procuring one of these bonds each month and making $2,000.00. Now, if one of these bondsmen advertises that he will write bonds for little or no money down and is very lax on cosigner qualification he will end up writing all five bonds each month and collecting only a small fraction of the fee. The other bondsmen who are doing things the way they should be done don’t make a dime. It doesn’t take long for the careless bondsman to get into trouble because his liability is going through the roof. But until that liability gets to the point that he can no longer pay the forfeitures, none of the other bondsmen in the county are making any money.

The answer to the problem lies in requiring a minimum percentage be charged on each bond and then prohibiting the extension of credit by a bondsman. Until January of 2005 a Judge in Livingston county required bondsmen to swear under oath that they were not extending credit and that they had received the full premium before the bond could be written. This begins to level the playing field because a bondsman who understands the risk involved in writing the bond no longer has to compete with one who doesn’t. And the criminal is no longer able to “shop” for the best price.

Several years ago, fed up with the number of forfeitures that I received in the mail each month, I began looking for a common thread that would help me better identify a bad bond before it was written. As I looked back over several years of records I realized that about 95% of my forfeitures were from clients to whom we had extended credit. I told my agents that we would no longer extend credit on bonds. Within six months my forfeitures had dropped by 95% and the income that my agents and I were making remained virtually unchanged. Sure we wrote fewer bonds but we got all of our money up front and didn’t have collection and bounty hunting fees chipping away at our income. When a person is charged with a crime, the cheapest thing on the menu is the bond fee. Attorney’s fees and court costs are usually about equal to the full amount of the bond. When a client can’t pay the full fee, you are likely to incur a forfeiture because if he can’t pay you, he can’t pay the lawyer or the fines either and sooner or later the Judge is going to give him the ultimatum that if he shows back up in court without an attorney or his fine money, he will be put in jail and an attorney appointed for him or his fines taken out in time served.

I have never been in favor of restricting people from getting into this business. If this proposed law were in effect 14 years ago, I could have never become a bondsman much less a general agent. I feel that I turned out OK and a lot of the people this bill would prohibit from becoming bondsmen will too. It is just an un-American ideology and in this troubled economy the wrong thing to do.

I am in full agreement with Mr. Cooper on the repeal of the Lee Clause. I make no apologies for this position as I feel that persons CONVICTED of felonies should not be allowed in the bail bond or surety recovery business no matter how long it has been. I do feel however, that if the court sees fit to issue an SIS, and the felony “goes away” after completion of a probationary period, then this should not be held against the prospective applicant.

More government regulation is NEVER the answer.

Respectfully Submitted
Michael R Thomas
Thomas Training Institute
www.thomastraininginstitute.com

4 comments:

  1. Well said. Although I agree that more government is not always the answer, I do feel that a certain amount of regulation or legislation may be prudent.

    Require the full 10% up front, thereby eliminating credit-bonds. And strict enforcement on collecting forfitures. Even if the Agent or General Agent goes out of business, have laws or regulation in force to collect those forfitures.

    I can also agree with more stringent training. Even though I feel that the training that I recieved was well planned and well exicuted, I would have no problem with making the requirements for passing the course more than just sitting in a classroom and staying awake.

    There are several things that could be done to weed out those that think that they can become like Dwane Chapman by just sitting in a classroom for 3 days and passing a test.

    I urge all that read this blog to contact their Representatives and Senators and ask that they vote against this Bill. Let's all collect our ideas in a central area. Maybe send all of our ideas to Missouri Bondsman or let our General Agents know our ideas and let them meet to draft a Bill that is better thought out and the collective idea of ALL the people in this industry. Then we can present it to the House for consideration.

    As I said, I agree that more government is not always the answer. However, "We The People" can get together and propose a better idea.

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  2. Dave Strassner2/13/2009 8:47 AM

    I've read a lot of ideas lately; some I agree with and some not. I happen to be one that likes this bill. If we aren't careful we will be prime to become an insurance state. Keep this in mind when all you want is for general agents to prove $10,000.00 in assets. FYI it would not take legislative action to become an insurance state. This could be done by a whim of your local judge.

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  3. On the point of the Lee Clause, I'd like to offer the following. When a person is charged with a crime, misdemeanor or felony, and receives an SIS (or SES, for that matter), it is required that the party in question plead guilty to the charges levied against them. Therefore, in effect, an SIS (SES) is a conviction. The difference is that punitive action (sentencing) is set aside pending the completion of probation or some other obligation to the court, and the conviction doesn't appear on the party's record. The arrest and charges, however, still do, as do the dispositions of SIS (SES) and probation.

    One has to keep in mind, that the party in question was still of the mindset to commit the crime when (s)he did so, regardless of what may appear on paper later on. And, at least in my exoerience, an SIS (or SES) is rarely indictive of rehabilitation.

    That's one reason the requirements for a Carry Concealed permit were written differently than those for the old Permit to Acquire. The requirements for a Carry Concealed permit were written to address the issue of an SIS (SES) interpretively being held as a "non-conviction", and were worded so as to disqualify an SIS (SES) from eligibility.

    The point is this. For the most part, a felon is always going to be a felon, regardless of how good his attorney was and what kind of deal they managed to negotiate with the court. Statutes governing eligibility for licensure in the bail bond industry should be amended to read similarly to those written for the Carry Concealed permits, thus negating the interpretation that an SIS (or SES) is not a conviction.

    The next argument I expect to see, would be that "even honest people make mistakes". True, however, when that mistake is serious enough to warrant being charged with and subsequently convicted of a crime, then it should carry a price. I would think that in most cases, ineligibility for licensure in this industry would be a rather small price to pay.

    ReplyDelete

Although Missouri Bondsman encourages debate on topics of interest to the bail industry, please be aware that comments are moderated. Please observe the posting rules. No comments will be printed that contain spam, profanity, or libelous comments. Please post comments in a civil, professional manner.

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