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Bail company must abide by California consumer protection laws, court rules in major setback for bail industry

Bail financing agreements qualify as consumer credit contracts, the First Appellate District held in a late Wednesday ruling that will prevent Bad Boys Bail Bonds from collecting on outstanding debt owed by cosigners.

SAN FRANCISCO (CN) — The bail industry must comply with California consumer protection laws governing credit agreements, a state appellate court ruled Wednesday in upholding a judge’s order barring Bad Boys Bail Bonds from collecting on nearly $34.5 million worth of outstanding bail debt from co-signers seeking to free their loved ones from jail.

The case stems from a bail financing agreement Kiara Caldwell signed to help a close friend who was arrested for shoplifting. Bad Boys wanted $5,000, though Caldwell could only pay $500. Caldwell put down $500 and signed a contract with the bail agency, believing at the time that her friend would be responsible for paying the remaining $4,500. 

But Bad Boys went after Caldwell, calling her constantly at home and at work and trying to take her to court in 2019 for the outstanding $4,500, plus costs and fees. She ultimately filed a class action challenging these ostensibly unenforceable credit agreements.

This past April, Alameda County Superior Court Judge Brad Seligman ordered the company to stop filing collections actions against cosigners like Caldwell, finding Bad Boys should have given Caldwell proper notice about the debt and financial risks she was assuming on her friend’s behalf.

“Such relief is appropriate to stop an ongoing illegal practice,” Seligman wrote.

Bad Boys argued that a bail agreement isn’t a credit contract but a signed commitment to ensure an arrestee's future appearance in court, an assertion rejected by the First Appellate District.

The appeals court instead found a bail transaction to be an extension of credit under California Civil Code section 1799.90 because it is an agreement under which a consumer pays their bail bond premium through monthly installments.

“A bail premium financing agreement extends credit to cosigners who are unable to afford the bail bond premium by accepting an initial down payment and allowing them to pay the balance of the premium in monthly installments. This financing agreement is ancillary to the bail bond transaction,” Justice Gabriel Sanchez wrote.

Accordingly, the agreement falls under a statute designed to protect cosigners from unwittingly entering into onerous contracts without understanding their obligations.

Sanchez, who was joined in his opinion by colleagues Justice Kathleen Banke and Justice Jim Humes, added that the panel could find nothing within the text of California’s consumer credit laws to indicate that the Legislature intended to exclude bail bonds from the protections that apply to other kinds of contracts.

Though the justices acknowledged that it might “upend" Bad Boys’ business to enforce the injunction, they found nothing unfair about Seligman’s order that it immediately stop filing new collections case against cosigners while Seligman decides the merits of Caldwell's case.

“To apply the injunction prospectively, as BBBB urges, would exclude scores of unsuspecting cosigners who never received statutory warning of the risks of cosigning a bail bond premium agreement and became liable for the full amount of the premium and subject to enforcement actions, garnishment of wages, damage to their credit, and other serious financial and legal consequences,” Sanchez wrote.

The panel was also unmoved by Bad Boys’ claim that Caldwell wasn't a cosigner under section 1799.91 because she personally benefited from having her friend out of jail.

"BBBB’s argument would write the statutory notice provision out of existence because any cosigner might derive a 'personal' or psychic benefit by helping to guarantee a consumer credit contract on behalf of a friend or loved one. We do not believe the Legislature intended such a strained and self-defeating reading of this provision,” Sanchez wrote.

In an email, Elisa Della-Piana, legal director at the Lawyers’ Committee for Civil Rights of the San Francisco Bay Area who represents Caldwell, called the court’s decision a “devastating blow to the bail industry.”

“The court confirmed that it is absolutely illegal for bail companies to violate consumer protection laws. This case is proof that the bail industry is abusing and exploiting vulnerable California families,” she said. “We anticipate that the impact of this decision will ripple across the nation — any bail company violating consumer laws should be ready for a lawsuit.”  

Attorneys for Bad Boys were unable to comment on the ruling late Wednesday.

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