Bail bondsmen who work in Orleans Parish have been overcharging their clients for years and must start issuing refunds, to the tune of about $100 for the average bond recipient, Louisiana Insurance Commissioner James Donelon decreed in a directive issued late Wednesday.
Donelon’s order, which threatens the bond companies with stiff penalties if they fail to provide the refunds, could result in refunds for roughly 50,000 clients at a total cost of some $6 million.
The order — which is likely to be challenged in court — is directed at all bail bond and commercial surety companies operating in the state. But at issue are the higher rates that most bail bond companies charge in Orleans Parish compared with other jurisdictions in Louisiana.
Donelon's directive comes more than a year after the Southern Poverty Law Center filed a complaint with his office, which regulates the bail bond companies. The advocacy group alleged that nearly every company in New Orleans routinely violates state law by requiring that clients pay an additional 1 percent of the bond amount.
The Legislature long ago set the statewide "premium" for bail bonds at 12 percent of the total bail amount ordered by judges. That means that people who can't afford, for example, $10,000 bail must scrape together $1,200 for a bond company.
But bondsmen in Orleans Parish have routinely charged their clients 13 percent, a practice dating as far back as 2005. That’s when the Criminal District Court judges got the Legislature to raise the statewide "license fee" for bail bondsmen from 2 percent to 3 percent, just for Orleans Parish.
The proceeds of the state license fee are divvied up among parish courts, sheriffs, district attorneys and indigent defender programs. The extra 1 percent in Orleans Parish all goes to the criminal court.
The statute makes one explicit exception: Bondsmen can receive an extra half-percent premium in Jefferson Parish. But nothing in state law allows bondsmen in Orleans Parish to charge more than 12 percent, Donelon wrote.
The “increased fee was to be absorbed by the industry, not passed on to consumers,” he wrote. “Had the Legislature desired to pass the fee on in the form of an increased premium, they would have amended” the statute that sets the bail bond premium at 12 percent. “This was not done,” he added.
The complaint named 21 bail bond companies and underwriters working in the city.
Donelon directed all bail bondsmen who have charged 13 percent to dig through their records and issue refunds by June 1. The Southern Poverty Law Center estimated that at least 50,000 people may have paid too much, likely totaling about $6 million.
“It means a lot of people in New Orleans who were exploited by the bail bond industry should get that money back,” said Micah West, a senior staff attorney with the SPLC.
Donelon acknowledged in his directive that the bond companies “may have been erroneously informed that they could charge” the extra 1 percent as a pass-through to customers.
Initially, Donelon punted on the complaint from the SPLC, asking a state judge in Baton Rouge to rule on whether the bond companies have run afoul of state law.
Bail bond companies have argued that the statutes are vague and that the Legislature never meant to undercut their profit margins when it approved the extra 1 percent fee for Orleans.
But the judge, Michael Caldwell, kicked the complaint back to the Department of Insurance, saying it was premature for a court to rule; the department needed to penalize a bondsman before the court could act, he said.
Jon Wool, director of justice policy for the Vera Institute of Justice, said bondsmen in New Orleans have continued to charge arrested people 13 percent. Vera first raised the issue of the 13 percent premiums in a 2017 report on the "user-pay" justice system in New Orleans.
“This is another indication of why having a money-based bail system is problematic,” Wool said. “When money is the goal of any part of the criminal justice system, it’s going to be misused.”
Blair Boutte, a prominent New Orleans bail bondsman, declined to comment on the directive.
New Orleans bondsman Matthew Dennis, an outspoken critic of bail reform efforts in New Orleans, said by email that if there are refunds, the public agencies should pay them.
"I find it disturbing that the insurance commissioner would separate out a single industry as the only entity on the planet that is unable to pass government-imposed taxes and fees on to the consumer," Dennis said. "The insurance commissioner is wrong."