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In seeking to collect on millions in debt, bail bonds company says consumer law doesn’t apply

A state appeals court will decide whether people who helped friends or family with the cost of bail are responsible to repay loans floated by a bail bond company.

SAN FRANCISCO (CN) — Bad Boys Bail Bonds asked a California appeals court on Tuesday to overturn an injunction barring it from collecting on millions of dollars in bail debt, saying state consumer protection laws requiring notice to cosigners do not apply to its business.

This past April, Alameda County Superior Court Judge Brad Seligman ordered the company to stop filing collections actions against cosigners on the hook for nearly $34.5 million in outstanding debt for contracts they signed to get their loved ones out of jail.

Kiara Caldwell signed such a contract to help a close friend who was arrested for shoplifting. Bad Boys wanted $5,000, 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 the one ultimately responsible for paying the remaining $4,500. 

After months of threatening phone calls to both her home and place of employment, Caldwell sued Bad Boys for violating § 1799.91 of California’s Unfair Competition Law by failing to inform her that as a cosigner she would be responsible for repayment.

Bad Boy's attorney Brendan Begley said that since Caldwell's friend never signed anything, the contract in question was only between Caldwell and the bond company. “In this case Caldwell and people similarly situated to her are not really cosigners,” he told a panel of three First Appellate District justices who will determine whether to uphold or reverse Seligman’s order.

But this wasn’t so obvious for Justice Gabriel Sanchez, who observed that the person bound by a contract is usually the one who receives the benefit of the service provided. In this case, it was Caldwell’s friend.

Begley said it was as if Caldwell had bought a car as a gift for someone else — she would still be answerable for the car payment even if someone else gets to drive it. Sanchez seemed unconvinced by the analogy.

"With a contract like this, if the cosigner isn’t the person who is actually receiving the money or services that are the subject of the contract, I think the implication of your argument would essentially gut the cosigner protection,” he said.

Caldwell's attorney Niall Roberts said bail bonds are like any other financing arrangement backed by a cosigner that require statutory notice. That drew a sharp question from Justice Kathleen Banke.

“Why is it that for decades nobody ever seems to have thought of this?” Banke asked, marking the apparent novelty of the case.

Roberts said the answer can be ascribed to changes in the industry. “The cost of cash bail has become far higher than it was in the past,” he said. “It's now the case that an average Californian going into Bad Boys' storefront in Oakland — like Ms. Caldwell did — cannot afford even the 10% of a bail bond. They can't afford the price of doing business. So it is necessary for there to be some sort of financing arrangement.”

He said bail bonds companies are increasingly operating like payday lenders and debt collectors, a comparison to which Begley took strong exception.

“The cost of bail is set by regulatory agencies, not us,” Begley said. “Folks like my client are helping people who can't afford bail to get out. There are a lot of problems with the bail system but my clients are kind of powerless to fix all those problems. Sticking my client with a $34 million bill for helping people get out on bail just doesn't seem like the proper fix.”

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