Who Really Makes Money Off of Bail Bonds?

A new report finds that the global insurance companies underwriting bonds are reaping their rewards while shouldering virtually none of their risk.

A sign advertising bail bonds
Kathy Willens / AP

Forcing people awaiting trial to pay bail in order to get out jail is, to say the least, a flawed way of pursuing justice. The accused or their family can be required to put down money in order to return home as they await a trial (which can take months, years, or never even happen)—which in practice has disproportionately hurt communities that are low-income (because they struggle to come up with the necessary funds) and black (who see higher rates of jail time, like other communities of color). The deaths of Sandra Bland, Jeffrey Pendleton, and Kalief Browder—all of whom were black and remained unable to post bail after being arrested—have publicized how so many Americans are unable to get out of jail because of bail requirements. And yet, despite the well-documented inequalities and flaws in the system, and the increasing pressure to change it, “money bail,” as the practice is called, remains the norm in the American legal system, propping up a thriving for-profit bail-bonds industry.

It’s no wonder that so many low-income people awaiting trial have to turn to a bail-bonds operation. According to the Prison Policy Initiative, a nonprofit, black men and women ages 23 to 39 who were being held in local jails had median earnings of between $568 and $900 the month prior to their arrest. The median bail for a felony arrest, meanwhile, is $10,000, a sum most arrested individuals and their families would simply be unable to pay. On top of that, black defendants between the ages of 18 and 29 years old were asked to pay, on average, higher sums for bail and were less likely to be released on their own recognizance, meaning no bail payment was required.

A new report from the nonprofit Color of Change and the American Civil Liberties Union (ACLU) sheds further light on the country’s bail system. The report finds that around 70 percent of those currently in jail have yet to be convicted of a crime. Not unrelated: Between 1990 and 2009, the share of people arrested who were required to post money bail grew from 37 percent to 61 percent, according to the report.

This means that families who can’t afford bail face a difficult choice: either leave a loved one behind bars—something that’s been shown to threaten their physical and mental health, and increase the likelihood of conviction—or enter into financial agreements with bail-bonds corporations. Given that these are the usual choices, it’s no surprise that the share of releases that depended on for-profit bail bonds outfits has climbed along with the share of arrests requiring money bail for release, growing to 49 percent in 2009 from only 24 percent in 1990.

In a standard bail agreement, families that have enough money to post bail give it directly to the court and get their money returned once a case is over. But it’s different for families that rely on private bail bonds: Instead of paying a refundable amount to the court, they pay a non-refundable portion of the total bail (usually 10 percent) to a bail-bonds company, which then writes a bond for the full bail amount promising that it will be paid if the person doesn’t appear for court. That 10-percent payment is money that customers will never get back, even if there’s no conviction. In addition to losing the money they’ve put down, bail bonds also often leave families paying loan installments and fees even after a case is resolved, the study finds. And bail-bond agreements often include additional terms, which can bring on additional fees, surveillance, and/or property loss, if a house or other asset was put up as collateral.

The sums that families lose in the for-profit bail system is striking. Over a five year period just in the state of Maryland, families of people who were accused of crimes and went on to be cleared of any wrongdoing parted with around $75 million in non-refundable bail-bond payments, according to the report. Looking at discrepancies by race makes the findings even bleaker. In 2015, fewer than 5,000 families in New Orleans together paid $4.7 million in non-refundable premiums, and black families paid 84 percent of bail premiums and fees city-wide that year.

The study also illuminates the structure of the bail-bond industry, and where it gets its capital. For-profit bail businesses are, it should be noted, not part of the country’s legal apparatus. (In fact, the only two countries that allow companies to operate for-profit bail operations are the United States and the Philippines.) And it’s not just bondsmen who are making money off of bail bonds. While bail-bond services are often associated with the myriad small storefronts that can be found in poor communities across the country, many of them, the report finds, are actually run by large global insurance companies.

The bail system, in theory, is supposed to minimize the risk that an arrested party will inhibit the legal process, usually by failing to show up for court or fleeing the area. The threat of losing the money posted for bail is supposed to deter such evasive tactics.

When people rely on bail bonds, they become involved in a complex transfer of money and risk, such that families generally wind up on the hook, the study finds. That’s because bail involves what are known as “surety” bonds, which are increasingly backed by large global insurers. When a family pays a bail-bonds agent, the bail-bonds company then pays an insurance company a portion of that money to back the bond they’ve issued. The company also pays into what is called a “build-up fund,” which ensures that money is available if needed. But unlike insurance one might take out on a car or home, surety bonds place the risk and requirement for full payment on the person who takes out the bond. If the bonded individual doesn’t show up for their court appearance, which would trigger a need for the full bail amount to be paid, the insurer only has to pay up as a last resort.

According to Color of Change and the ACLU, it rarely comes to that. In essence, families wind up taking on debt and risk while bond companies and insurers mostly just get the profit of the bail premiums, fees, and fines that families pay. In a fairer world, people wouldn’t be penalized by the legal system for not having, say, $10,000 in liquid cash: Either there wouldn’t be money bail, or money bail would at least be more affordable, or the bond companies and insurers would actually shoulder significant risk after taking a non-refundable payment of $1,000, which is a fee that people with enough funds ultimately don’t have to pay.

Overall, the industry is a profitable and fairly concentrated one. Though there are more than 25,000 bail-bonds companies across the U.S., only about 10 insurers are responsible for underwriting the bulk of the $14 billion in bonds that are issued each year. The industry as a whole brings in around $2 billion in profit a year. Surprisingly, it’s not even clear which companies are actually involved. The report finds that private-equity firms play a role, but their holdings are often murky because global insurers build in several layers of opaque corporate structures between their corporate brand, bond-insurance operations, and bail-bonds storefronts.

Because insurance is largely regulated on a state-by-state basis, oversight of insurers participating in for-profit bail operations can vary widely and get lost in the scope of an insurer’s larger business operations. And these insurers make serious lobbying efforts to keep things this way, making reform even harder. The result is a system in which the poor often wind up even further in debt after getting arrested, whether they’re guilty or not.