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New Orleans Bail Companies Owed Millions In Illegal Fees. Now They May Get To Keep The Money.

The bail bonds industry was caught overcharging 50,000 families $6 million over 14 years, according to SPLC.

New Orleans bail bonds sign
Flickr/Paul Sableman

In 2014, Jerome Morgan’s murder conviction was overturned after it was proved that the prosecutors in his case withheld evidence and two people admitted they had been coerced into falsely accusing him. Morgan, who spent 20 years in prison from the time he was 17, was looking forward to finally going home to New Orleans.

But, as he recently told a Louisiana state Senate committee, “The nightmare that I endured did not end.” Instead, the Orleans Parish district attorney moved to prosecute him again for the same crime. His friends and family couldn’t afford to pay his $250,000 bail up front to get him out of jail. Even after it was reduced to $25,000, Morgan sat in jail for 18 days while they scraped together enough money to pay the 13 percent bond premium that New Orleans bail companies charged to get someone out of jail.

“I felt ashamed that I had to ask them to raise money for me because they had already gone through enough agony and humiliation,” Morgan told the committee.

Eventually he was released from jail and the district attorney later dropped the charges. Later, because of an order issued in February by the commissioner of the Louisiana Department of Insurance, Morgan found out the bail company that his loved ones had used to get him released had overcharged them by $250.

Louisiana bail bond companies are legally allowed to pocket up to 12 percent of the bond amount when they put up the money to get someone out of jail. But the state insurance commissioner concluded that New Orleans bail bond companies have been overcharging people for years. The companies started tacking on an additional 1 percent fee to cover an increase in licensing fees after 2005. The Southern Poverty Law Center (SPLC), which first alerted the insurance commission to the issue, estimated that bond companies had overcharged about 50,000 families by $6 million total over 14 years. The insurance commissioner ordered the companies to refund these families by June 1.

But on April 23, the state Senate passed legislation that clears the bail bond industry from having to repay any clients for overcharging them. The legislation passed out of the House insurance committee on Tuesday and now awaits a full vote.

This is wrong and it’s cruel. We should be supporting the commission’s effort to hold the bail bond industry accountable.

Jerome Morgan wrongfully convicted New Orleans resident

The decision to allow the bond companies to keep the money undercuts regulators’ authority, Jon Wool, director of justice policy at the Vera Institute of Justice’s New Orleans office, told The Appeal.

“The insurance commissioner did what we expect our regulatory bodies to do, which is ensure the agencies they regulate are following a law, and when they find that they are not following a law, require them to take corrective action,” Wool said. “That’s an incredibly important principle.”

“All I can do is shake my head in disbelief,” Morgan said. “This is wrong and it’s cruel. We should be supporting the commission’s effort to hold the bail bond industry accountable.”

Every year, bail bond companies make millions off of New Orleans residents; the figure was $4.7 million in 2015.

“One percent sounds small, but every year that was about $500,000 in overcharges,” Micah West, a staff attorney at SPLC, pointed out.

West argued that the New Orleans senators who pushed for this legislation are harming their own constituents.

“This is a real opportunity for the New Orleans delegation,” he said. “Are they supporting their constituents or are they supporting the bail bond industry?”

The average family is most likely owed about $100, according to SPLC, which is significant for someone living in poverty. “That is money that the city’s Black families and low-income residents could have been spending on transportation or investing in education and their family’s healthcare and mortgages and stable housing,” West said. “And instead it was money that was being taken from their pockets and being given to these private companies.”

Some families simply couldn’t afford to pay 13 percent of a bond amount up front. For those people, their loved ones faced staying in jail until their hearings instead of returning to their jobs, children, and lives.

The bail bond companies say they never knew they couldn’t pass the extra fee on to consumers. In the hearing where Morgan testified, Senator Troy Carter, a main sponsor of the legislation, argued that companies “may have been erroneously misled,” which “makes them somewhat of a victim.”

It was money that was being taken from their pockets and being given to these private companies.

Micah West staff attorney at SPLC

In 2005, the state legislature began charging New Orleans bail companies an extra 1 percent fee to be diverted into the court budget, essentially increasing the annual licensing fee bondsmen pay to 3 percent. (That scheme, in which a cut of each bail bond was funneled back, in part, to judges setting the bail amounts, was ruled unconstitutional by a federal judge last year.) As a result, their net profit on each bond was expected to drop.

But instead, bondsmen simply started charging New Orleans residents an extra 1 percent of the bail amount. “The increased fee was to be absorbed by the industry, not passed on to consumers,” Commissioner of Insurance James Donelon wrote. Charging 13 percent “is not permissible.”

Carter attributed the problem to a drafting error in the original bill that added the extra 1 percent fee for bail bondsmen, arguing the legislature meant for the fee to be passed on to consumers. Two representatives of the Association of Louisiana Bail Underwriters testified that they, too, believed the fee was meant to be passed on, not absorbed by bond companies. (Carter and the bail underwriters group did not respond to a request for comment.)

At first the senators sought not only to shield the companies from repayment, but to legalize the bail bond industry’s conduct by increasing the amount that companies could legally charge New Orleans residents to 13 percent. That failed, but the Senate kept the provision that denies compensation to overcharged clients.

The issue now moves to the House, where a Republican representative had introduced a version that would increase the amount a bail bond company can charge in New Orleans to 15 percent. That proposal is no longer under consideration. But when an amendment was offered before a committee vote to ensure that bail bond companies still have to compensate those who were overcharged, it failed 8-3.

Wool thinks the courts will ultimately decide the issue. The bail bond industry has already sought an administrative law hearing on the insurance commissioner’s directive.

The courts may also decide whether the legislature has the authority to undo the insurance commissioner’s order. West said the SPLC is prepared to take legal action on that question. “We think [it] violates the separation of powers,” he said, and that it undermines “the rule of law.”

This is not the first time that bail bond companies in New Orleans have been accused of overcharging clients. In a 2017 lawsuit, the SPLC alleged that two bond companies charged hundreds of dollars in extra fees, and sometimes collected those fees through kidnapping and extortion.

But the bail bond industry is powerful in the city’s politics. Blair Boutte, who owns Blair’s Bail Bonds, also owns political consulting firm B3 Consulting, which has run campaigns for local politicians and makes frequent contributions, including $2,500 to Troy Carter in 2015.

Advocates hope that the interests of residents will prevail over those of the bail bond industry. “The legislature should not burden families with the consequences of this overcharging,” Wool said. “They should be freeing New Orleans families from these kinds of financial burdens, rather than bailing out bondsmen.”