Delaware General Assembly

Signed 8/27/13

The General Assembly has ended, the current status is the final status.

HB 151

6/6/13

Keeley

Sen. Henry

AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO BAIL BOND AGENTS.

Revisions to the bail bond statute, 18 Del. C. Chap. 43, Subchapter II, are necessary in order to curb abuses of the bail bond system, and better serve the citizens and courts of the State of Delaware. Under the statute, the Insurance Commissioner regulates a large contingent of bail agents. The statute governs both surety bail agents, who post surety bonds issued by insurance companies, and property bail agents, who post cash or property bails. Many agents operate both as surety bail agents and cash or property bail agents. This bill aims to make the bail bond statute "self-contained," by eliminating most cross-references to the insurance producer statute (18 Del. C. Chap 17). It is also intended to clarify where requirements may differ for surety bail agents and property bail agents. The bill includes a number of other changes to the statute intended to clarify its terms and tighten regulatory oversight in order to control abuses of the system. The bill also makes minor changes intended to conform the statute to current Department of insurance administrative practices and terminology. The key changes contained in the bill are highlighted below. The bill retains unchanged in Section 4345 the independent authority of the courts to regulate bail agents. The bill clarifies the definition of property bail agent by including "Any person who charges a fee for or makes a business of furnishing property bail in any court proceeding, or who furnishes property bail in four or more court cases in any one year whether for compensation or otherwise." This is intended to include within this definition persons who act as property bail agents, but may assert in an attempt to avoid regulatory oversight that they are posting bails only as a favor for a friend or a relative. This bill will allow the Department and the courts to monitor more closely bail agents by requiring them all to be residents of the State of Delaware. A number of states currently have similar statutes requiring bail agents to be residents of the licensing state. Delaware residency may be established under the bill by maintaining a principal place of business in the State where records are kept. Nonresident bail agents who currently are licensed and who wish to renew their licenses will be required to establish residency and successfully pass the Delaware bail agent examination when their non-resident licenses come up for renewal in 2014. The bill provides for "transfer bonds," which are a means by which an out-of-state bail agent may post a bond through a Delaware-licensed agent, who must indicate in writing on the bond the name and address of the referring bail bond agent. The Delaware-licensed agent posting a transfer bond shall be responsible to assure compliance with all provisions of this subchapter with respect to the bond. The bill provides that surety insurers, by appointing a surety bail agent, thereby certify, to the best of the insurer's knowledge and belief, such person is competent, financially responsible and suitable to serve as a representative of the insurer. In order to assure that surety bail agents are charging premiums only as approved by the Commissioner, surety insurers are required to conduct semi-annual audits of their appointed surety bail agents, and report to the Commissioner thereon. The statute also requires property bail agents to file with the Department a statement under oath of the assets and liabilities of the applicant, and to notify the Department of any material changes in assets or liabilities. This requirement is intended to provide the Department with a basis on which to evaluate the current financial responsibility of the property bail agent, similar to the financial data that already must be provided to the Department by surety insurers and all other insurance companies transacting insurance business in Delaware. This bill will restrict participation by unlicensed persons in the bail bond business by requiring disclosure to the Commissioner of the identity of each person having or seeking to acquire a ten percent or greater financial interest in a bail agent’s business or any bail bond, and by requiring any person who acquires a ten percent or greater financial interest in a bail agent’s business or a bail bond to be licensed as a bail agent. The bill also provides that any unlicensed person acting as a bail agent is guilty of a class F felony. This penalty is the same as the one imposed by 24 Del. C. § 5515(b) upon any unlicensed person acting as a bail enforcement agent. This bill also is intended more clearly to authorize the Commissioner to impose sanctions upon bail agents if at any time they fail to meet all of the requirements for issuance or renewal of a license. The Commissioner shall, upon receipt of an information or indictment, immediately temporarily suspend any license or appointment issued under this subchapter when the licensee has been charged with a felony or a crime which includes an element of dishonesty or fraud or involves moral turpitude, or a crime punishable by imprisonment of 1 year or more under the law of any state, territory, or country. A person convicted of a felony or any of those other crimes may not be licensed, or if such person is licensed, such person’s license shall be revoked upon conviction. All bail agent licenses are subject to denial or revocation if the bail agent violates any law relating to bail or any provision of the insurance code or if the person at any time fails to meet all of the criteria for issuance or renewal of a license. Going forward the State will require criminal background checks from both the FBI and SBI in connection with initial applications for licensure. The current statute requires only a background check from the SBI. The bill also establishes tighter standards for solicitation, record retention, reporting requirements, and accounting for premiums and other charges that allow for stronger regulatory oversight by the Department. Uniform standards of record retention are intended to ensure that the Department has access to tangible records when conducting market conduct examinations or other investigations of bail agents , and to increase transparency in the industry. Under current law, the premiums for surety bail bonds and the commissions and other charges for cash bails must be filed with, and approved by, the Insurance Commissioner. However, unscrupulous bail agents engage in a practice of "undercutting:" where in order to get business, they obtain only a limited portion of the filed rate of commission, and do not enter into a written agreement, before posting the bond. This practice allows defendants to post bond and leave detention at potentially much lower rates than the courts would expect based on the rates, charges and commissions filed with the commissioner. With regard to any surety bail bond in excess of $1,000, the total filed premium for the surety bail bond shall be at least 10% and not more than 12%. It shall be unlawful for a bail agent to post a surety bail bond without first charging and receiving at least seven percent (7%) of the surety bail bond amount, and entering into a written contract signed by the parties containing all terms and conditions of the bond. The total charges or commissions for a cash bail may not be less than twenty-two percent (22%) or more than thirty-three percent (33%) of the bail amount posted by the property bail agent. It shall be unlawful for a property bail agent to post a bail without first charging and receiving at least twenty percent (20%) of the cash bail amount, and entering into a written contract signed by the parties containing all terms and conditions of the bond. Also, this bill will establish clearer standards for the return of collateral to persons pledging the collateral, prohibit any bail agent from using more than two trade names, and make minor corrections and changes to the current law. The bill also provides for conservation of a bail agent business that has become financially impaired or insolvent, or has been abandoned by the licensee, or has been conducted in such a manner as to require or justify revocation of the licenses of that licensee, and if the Commissioner further finds that the conservation and administration of the business of the licensee would be in the public interest. This portion of the bill is similar to 18 Del. C. §1713 governing insurance producers.

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Takes effect upon being signed into law

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