Bail Bonds Part II – Is The Business Doomed?

bail_bondsI wrote recently that what I learned about bail bonds companies made me appreciate them, at least from my capitalistic “that’s an interesting and possibly profitable way to make money” perspective.

That doesn’t mean I’m deaf to other arguments, against the industry. Those arguments have gotten louder recently, to the point that bail bonds businesses in places like Houston, and the entire state of New Jersey for that matter, face an existential threat right now. They may not survive.

If you don’t work in and around the bail bonds industry, you might not already know that a recent judge’s ruling is killing them in Houston.

At the end of April Chief District Court Judge Lee Rosenthal ruled that all defendants accused of misdemeanor offenses in Harris County (where Houston is) must be released from jail within 24 hours. The ruling went into effect this summer in Harris County, pending resolution of a lawsuit, expected in October.

The practical effect of the ruling is to make all misdemeanor defendants eligible for bail through county-supported pretrial services or a Sherriff’s bond, thus avoiding the need to pay for a more costly private bail bond.

That, plus the expansion of Harris County’s pre-trial services to respond to the ruling, has caused the elimination of 80 percent of the private bail bonds business, according to John McCluskey of Action Bail Bonds in Houston. He believes all of his fellow bail bonds competitors in Harris County have seen a similar catastrophic drop-off in their business. According to McCluskey, they’re pretty much dead.

Let me break down the arguments about bail bonds, pro and con. Proponents and opponents of commercial bail bonds cite the same three important factors, but come to completely opposite conclusions about the proper role of private bail bonds versus what we might call the ‘public option,’ made up of a nearly-free County-supported pre-trial services’ “personal bond,” or another free public-option, called a Sherriff’s bond.

Among both pro and con camps, the three agreed-upon factors to argue are:

  1. Fairness – Is it fair that people are released from jail awaiting trial, or not, based on whether they can afford bail, or not?
  2. Public Cost – Are taxpayer resources being used appropriately?
  3. Public Safety – Do bail conditions adequately prevent accused criminals, awaiting trial, from re-committing crimes? And which method best guarantees that people show up in court to face justice?

What opponents and proponents don’t agree on is the data, the other side’s use of data, or the meaning of that data. As a finance guy, the second issue, public cost, caught my eye in particular.

In conversations with three different bail bonds owners in Texas, plus a fourth expert who has done consulting work for the industry, I heard them proudly represent a private-sector solution to the public-sector problem of ensuring court appearance for trial, thereby saving taxpayer dollars.

Requiring a defendant to pay for his release, bail bondsmen say, saves taxpayers from taking the financial risk of their eventual return to court. The cost of monitoring defendants falls to bail bondsmen as well, not county employees. Finally, if a defendant fails to show up for trial, bondsmen say, the cost of collecting them doesn’t hit the county taxpayers.

In a narrow sense, taxpayer costs will go up in response to the recent shift to the public pretrial option for bail, the Houston Chronicle reported, as Harris County pretrial services hired a dozen new positions.

Mike Lozito, Bexar County’s head of pretrial services, estimates that he would have to triple his current staff of 71 to completely handle all bail cases, were Bexar County to go a similar route. Partly to avoid that additional public burden, Lozito told me, he welcomes the private/public partnership between pretrial services and the commercial bail bonds industry.

Yet, opponents of status quo commercial bail system make bigger, and ultimately more profound, cost arguments.

As Matt Alsdorf of the Laura and John Arnold Foundation told me, the narrow cost issue of bail bondsmen versus pretrial services does not accurately capture the true public expense of private bail.

As Vice President of Criminal Justice at the Foundation, a think-tank at the forefront of challenging the commercial bond industry, Alsdorf argues that we need to take into account the total cost of incarcerating people. Keeping penniless defendants in jail because they can’t post bail costs the public between $75 and up to maybe $300 dollars each night per person, depending on estimates and jurisdictions, according to Alsdorf.

US Senators Rand Paul (R- KY) and Kamala Harris (D-CA), argued in a recent New York Times editorial that 450,000 people sit in jails nationwide because they cannot make bail. They estimate this failure to afford private bail costs the nation an additional $14 billion more per year in an expanded jail population.

Further, as Alsdorf point out, the impact of losing out on employment, or disrupting families, makes extra time in jail an economic catastrophe for people least able to endure that hit. That economic hit may appear justified to some people, because it “punishes arrested people,” but it also would seem to encourage an ongoing cycle of poverty, which probably costs the public far more in the long run.

Facing the right-left alliance of Senators Rand and Harris, think-tanks like the Arnold Foundation, and civil rights groups like the one that brought the Harris County lawsuit, bail bonds companies ought to be very nervous. Could the Houston-area lawsuit spread to the rest of Texas?

As Bexar County’s public defender Michael Young explained to me, not right away, but maybe over time.

“It is true that there is a federal lawsuit pending in Harris County dealing with personal bonds and misdemeanors specifically. It is my understanding that the ruling in Harris County is specific to the facts presented in that case, so therefore any ruling wouldn’t automatically be applied to another county in Texas. However, the legal reasoning of the federal judge could be applied to any county, and could result in a similar ruling, in future cases”

I’ll interpret this to say, over time, follow-up lawsuits could eliminate private bail bonds in cities and counties all over Texas. As private businesses they might be dead men walking and not yet know it.

Please see related posts:

Bail Bonds I – An Interesting Way to Make Money



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2 Replies to “Bail Bonds Part II – Is The Business Doomed?”

  1. Much smaller cash bails directly to the courts/state, combined with pretrial risk assessments that result in pretrial release with no bail or personal recognizance bonds (basically the same only you are charge a fee if you don’t show) would probably do a better job for the public than our current system.

    Bail bondsmen rarely lose a bond. Even if the bonded party “skips” they are often quickly picked up by law enforcement on the resulting warrant. (Note that the bondsman does not pay for that arrest, the public does.) Even if the person remains outstanding they court rarely orders the bondsman to make good on the bond and even then they are relaxed on when payment must be rendered.

    As is so often the case with private businesses that interact with the government. Private gain and public risk.

    Unfortunately for the big bail reformers their new approaches are unlikely to result in helping those charged with crimes. Those currently unable to ‘bail out” will mostly fair poorly in any system that attempts to determine who will reliably return for court and not re-offend prior to court.

  2. Hey,
    I agree with you, bail bondsman services are in danger of loosing their business. The question I have is where will these businesses turn to next if their livelihood is taken from them? I personally do not think that bailing out possible criminals with taxpayers money is a good solution. There answer to our problems in my opinion lies behind making the legal processes more transparent and faster.

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I founded Bankers Anonymous because, as a recovering banker, I believe that the gap between the financial world as I know it and the public discourse about finance is more than just a problem for a family trying to balance their checkbook, or politicians trying to score points over next year’s budget – it is a weakness of our civil society. For reals. It’s also really fun for me.

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