Guest Editorial on HB628

Editor's Note: The following is a guest editorial submitted by Bart Cooper of Bart Cooper Bail Bonds. The letter addresses the industry concerning HB628:

As many of you know, HB628 was recently introduced by Representative Brian Yates. This legislation attempts to address some of the issues now facing the bail industry in Missouri.

In recent years, our industry has undergone a transformation for the worse. Gone are the days of trust and cooperation among companies and agents, having been replaced with a new era of avarice and greed. While the future of bail in Missouri appears dim, I believe we can work together to strengthen and preserve our profession for years to come. Accordingly, I’m asking for your help in restoring professionalism and accountability in our profession. But first, let’s examine the history of bail in Missouri, and how we got where we are today.

How We Got Here

1. The Good Old Days
   A. Traditionally, bail companies charged a minimum premium of ten percent per bond.
   B. The minimum premium was deemed necessary to cover potential losses and expenses while leaving some profit for the agent and general agent.
   C. The system worked and remained relatively stable for decades.
2. What changed?
   A. More and more people entered the bail industry. The proliferation of agents surged with the publicity created by series such as “Dog”. With an investment of less than five hundred dollars for a two year license, people soon learned that bail offered a means to turn a quick profit. Often seen as an additional stream of income, general agents were quick to hire new agents.
   B. The proliferation of agents inevitably led to more general agents. Needing only ten thousand dollars and two years licensure as a bail agent, the number of companies exploded. The past three years alone has seen a more than thirty percent increase in general agents.
   C. Courts also began modifying their approach to bail. Faced with budgetary constraints, some courts began to look at alternative forms of release as a means of generating revenue and reducing costs (e.g. ten percent to the court, cash only and recognizance bonds).
   D. Beginning in 2005, some circuit courts eliminated local qualification requirements. If you were licensed by the state, you could execute bonds within the circuit without further qualification. Without the oversight of local circuit courts, companies were free to execute bonds regardless of whether they possessed the assets necessary to fully collateralize the bonds should they forfeit.
   E. This combination of factors created extreme pricing pressures. With more agents and companies competing for a decreasing number of clients, the notion of a minimum premium began disappearing. Desperate for cash to cover personal or business expenses, agents began discounting bonds and extending substantial amounts of credit. Underwriting standards started to take a back seat to cash flow. Some even turned to questionable or unethical practices in an attempt to achieve profit.
   F. The erosion of a decades-old pricing structure negatively impacted the industry. Reduced cooperation and respect among companies and agents became pervasive. No longer were we able to trust each other, regardless of the merit of ideas or sincerity of efforts. As the pricing structure continued to break down, undercapitalized generals became commonplace. Discounted premiums, inability to collect on promises to pay, and poor underwriting left many generals with more forfeitures than they could pay.
   G. Much like the homeowner who owes more on their home than it is worth, undercapitalized general agents were faced with a decision: work diligently (and possibly borrow money) to resolve the tens of thousands in forfeitures and save the ten thousand dollars assigned to the state, or walk away. Clearly, the system is now at a point where people choose to walk away from the ten thousand dollars rather than work to resolve much greater forfeiture losses.
   H. As more and more general agents walk away, courts are left with more judgments than the ten thousand dollar assignment can cover. Frustrated by the breakdown in the bail process, courts become increasingly dissatisfied with the professional bail industry. This dissatisfaction, coupled with the budgetary pressures noted above, lead courts to adopt alternative forms of release. With fewer bonds available, the competition increases and the cycle repeats itself.

Current State of Bail

1. The Department of Insurance, Financial Institutions and Professional Registration (DIFP) now acknowledges that there are too many bail agents for the system to function properly.
2. DIFP also realizes that the current deposit requirement of ten thousand dollars is never sufficient to cover losses of generals who walk away from the business.
3. Courts are becoming increasingly dissatisfied with the commercial bail industry.

Why Act Now

1. The industry is nearing a point of catastrophic failure. Without action on our part, the DIFP and courts will be forced to act. Although we do not know exactly what these actions will entail, they could include raising the amount of assignment or altogether eliminating commercial bail.
2. We must begin working together to control our industry. In states where commercial bail is strong, licensing requirements are also strong. Strong licensing requirements foster strong bail associations, which in turn strengthen the commercial bail industry as a whole.
3. We are legislatively positioned to achieve results now. With support from both lawmakers and the DIFP, we are poised to reform our industry and restore professionalism and credibility.

Solutions

I have proposed legislation which I believe will begin to restore professionalism and accountability to the commercial bail industry in Missouri. The legislative changes are as follows:

1. Eliminate felons from the industry.
2. Increase the assignment for new general agents licensed after August 28, 2009 (when the legislation takes effect) to fifty thousand dollars.
3. Require every general agent to assign five thousand dollars to the State of Missouri any time they add an agent after August 28, 2009.
4. Allow the DIFP to raise the assignment requirement to fifty thousand dollars for any agent should they deem it necessary (for cause).
5. Raise the non-resident assignment to fifty thousand dollars.

I ask you to join me in promoting this legislation. While by no means a solution to all our problems, the proposed changes represent a start at attempting to address the issues before DIFP and the courts take matters into their own hands. Together we can begin restoring credibility, professionalism and cooperation in the Missouri commercial bail industry.

I look forward to discussing the proposed changes with you.

Sincerely,
Bart W. Cooper, General Agent