State Insurance Commissioner Jim Donelon ruled in February that thousands of bail bond clients in Orleans Parish are entitled to refunds from bondsmen he contends illegally overcharged them for well over a decade.
Those charges could add up to $6 million.
But state lawmakers aren’t waiting for the courts to sort out whether Donelon is correct that the city's bail bond companies violated the caps spelled out in state law for 14 years.
The Legislature appears poised to clear the bondsmen of the pending debt, stiffing those customers due refunds under Donelon’s order, before it ever hits the courts. The legislation is sailing through the process, virtually unopposed, and could receive a final vote on May 22.
The problem, critics contend, is that the sort of retroactive amnesty outlined in Senate Bill 108 is unconstitutional. So, judges may have the final say after all.
At stake is money collected from customers by New Orleans bail bond companies, whether the customers have a right to reclaim the cash and whether politicians — who contend the entire dispute springs from a simple oversight — can go back in time to clean up the mess.
The dust-up springs from an extra 1% “licensing fee” on New Orleans bail bond companies that state lawmakers levied back in 2005 to shore up the then-ailing finances of the Orleans Parish Criminal District Court.
Bail bond companies in New Orleans soon passed that fee on to customers by raising what they charged to 13% of the total bail amount — even though Louisiana’s law capping that “premium” at no more than 12% remained unchanged.
The bail bond fees apparently went unchallenged until September 2017, when the Southern Poverty Law Center filed a complaint with the Louisiana Department of Insurance, calling the charges illegal.
Donelon, a Republican, eventually agreed, ruling that the added 1% fee was meant “to be absorbed by the industry, not passed on to consumers.”
The decision shocked New Orleans bail bond firms, which found themselves potentially on the hook for small refunds on tens of thousands of bail bonds posted over 14 years, totaling an estimated $6 million.
Several companies have appealed to an administrative law judge and hinted at potential lawsuits to overturn Donelon’s order.
“It’ll bankrupt us,” said Stephen Adams, the owner of #1 Bail Bond in New Orleans and the president of the Association of Louisiana Bail Underwriters. “That’s millions of dollars for small business owners that they can’t afford to pay back. The profit margins are just not that high in bail.”
Some legislators contend they always intended for the customers paying to get someone out of jail, not the city’s bail bondsmen, to pick up the added charge. Forgetting to add a carve-out for New Orleans to the state’s 12% maximum on fees was, apparently, an accidental omission.
“It wasn’t supposed to come out of the bail bond industry,” said Norco Democratic Sen. Gary Smith, who backed the 2005 hike on Orleans bail bonds as a then-state representative.
“It was a user fee for the court system," said Smith, speaking last week at a contentious House Insurance Committee hearing as the chief sponsor of SB108. The panel voted 11-0 to advance the Senate-passed legislation without any amendments.
A pair of Smith’s then-colleagues who championed the bond fee increase — U.S. Rep. Cedric Richmond and former state Rep. Charmaine Marchand, both New Orleans Democrats — have sent lawmakers letters backing up that recollection.
Bail bondsmen from across the state packed a State Capitol hearing room, wearing buttons demanding “FAIRNESS FOR LA BUSINESS.”
Two other Democrats, state Sen. Troy Carter of New Orleans and Rep. Katrina Jackson of Monroe, have lent vocal support to Smith's measure, painting it as a business-friendly matter of simple fairness.
“If we don’t correct it, we have businesses paying back millions of dollars that they never really took in for the advantage of their business,” Jackson told colleagues, noting that the money collected ended up in the coffers of the Orleans Parish Criminal District Court, not the bail bondsmen.
“And, of course, the nasty precedent that sets for any business,” added Carter.
Rep. Edmond Jordan, D-Brusly, said it struck him as “inherently unfair” that bail bond companies “would be the ones that have to come back and pay” the refunds for allegedly overcharging customers because the extra fee was levied for the courts.
But critics contend that the state law capping bail premiums at 12% is unambiguous, with just a single exception allowing an extra half percent in Jefferson Parish, regardless of what legislators describe as their intent.
The bill “forgives bail bond companies that violated the law for more than a decade, allowing them to keep millions of dollars that they now owe … to New Orleans families,” Neil Sawhney, an attorney with the Southern Poverty Law Center, told lawmakers at the same hearing.
Bill Quigley, a Loyola law professor who opposes SB108, described it as a clear violation of the state Constitution, which bars the Legislature from passing laws to benefit a private interest in a pending legal dispute.
In this case, the Legislature “is very specifically weighing in, helping bondsmen in just one parish, in a dispute that has already been challenged in court,” Quigley said.
“It’s the definition of special interest, really," he said. "The bond community spent a lot of money supporting people that run for office. There’s nothing wrong with that. That doesn’t entitle them to special laws that apply only to them in an ongoing dispute against them.”
Sawhney, whose group lodged the initial complaint over the practice, argued that keeping the excess fees amounts to “theft.”
“Ignorance of the law is no excuse,” said Sawhney. “Typically, we do not let people who steal something off the hook because they claim they didn’t realize they broke the law.”
Whether the bail bond industry suffers financial pain from having to pay the refunds makes no difference, Quigley said. “They’re just not entitled to the money, period,” he said.
Quigley and other critics of the relief legislation argue that the pending bill offends the separation of powers and the judiciary’s role in settling property disputes.
He said the bill will be swiftly challenged in court if it passes.
Opponents have repeatedly pointed out that the bail bond customers in New Orleans are disproportionately poor and black. William Snowden, director of the New Orleans office of the Vera Institute, a criminal justice research and advocacy group, said low-income black families make up about 88% of the customers now owed potential refunds.
The criticism of the bill by liberal criminal justice advocacy groups has created uncomfortable tensions with its Democratic backers, especially Carter, who said he was “offended” by the argument it would harm the working-class and poor families he champions.
Carter, who’s black, accused Sawhney, Snowden and other critics of “inject(ing) an ugly race issue” and called their insistence on noting that low-income black families made up the vast majority of allegedly overcharged bail bond customers “race-baiting silliness.”
State Rep. Mary DuBuisson, a white Republican from Slidell, also expressed her displeasure with critics pointing out the racial impact of the bail fee issue, calling that argument "the racial card" and declaring it's "what's wrong with America today."
Quigley, in an interview with The Advocate, dismissed Carter’s criticism that bail bond critics are playing the race card by bringing up that those due refunds under Donelon’s order are predominantly black.
“That’s who it is," he said. "It’s not a race card. That’s who is arrested in New Orleans. And it’s low-income African-American people who were overcharged for something that wasn’t legal to charge them. And now the Legislature is going back and saying, ‘No harm, no foul.’ You can’t do that.”