Can Bail Bond Dealers Reduce Discrimination? A Guest Post

Adam Liptak has an excellent article in the Times that looks at an example of American exceptionalism: the Bail Bond Dealer. This really is a pariah industry. As Liptak put it:

Most of the legal establishment, including the American Bar Association and the National District Attorneys Association, hates the bail bond business, saying it discriminates against poor and middle-class defendants, does nothing for public safety, and usurps decisions that ought to be made by the justice system.

The great judge Skelly Wright summed up the consensus view when he said: “[T]he professional bondsman system … is odious at best.”

But market competition among bond dealers may actually reduce discrimination against poor and middle-class defendants.

Judges can cometimes discriminate when setting bail, and competition among bond dealers serves to lessen the impact of that judicial discrimination. For example, imagine that Levitt and Dubner are charged with the same crime and both have the same propensity to flee. But imagine that the judge has it in for Levitt and sets his bail at ten times Dubner’s bail (say $50,000 versus $5,000). In a competitive market, bond dealers may realize that Levitt will be more deterred by a $50,000 bail and may be willing to set a lower non-refundable percentage fee to bail Levitt out of jail. They might charge Dubner a 10 percent non-refundable fee to write his bond (in this case charging him $500) but they might only charge Levitt a four percent fee (in this case charging Levitt $2,000). What starts out as a ten-fold difference in bail, becomes only a four-fold difference because of market competition.

Opponents of bail bonds argue that a higher bond will not reduce Levitt’s probability of flight, as it’s designed to do, if Levitt uses a bond dealer. The non-refundable fee is a sunk cost to Levitt. Levitt isn’t liable to lose the higher bond if he skips town; the bond dealer is. But higher bonds can still deter flight even when defendants pay a non-refundable fee. If Levitt and Dubner both use bond dealers, Levitt is less likely to flee because he knows that a bond dealer will rationally search harder to protect $50,000 than to protect $5,000.

Even though Levitt and Dubner have the same generalized propensity to flee, the bond dealers in a competitive market nonetheless charge Levitt a lower percentage fee because they think the probability that he will flee is lower. Indeed, in a truly competitive market, the bail bond percentage fee is one of the oldest prediction markets. A four percent fee is a market indication that Levitt has a four percent probability of flight.

The bail bond dealer’s ability to mitigate judicial discrimination is not just a theoretical possibility. Joel Waldfogel and I crunched some numbers on bail setting and bond fees in Connecticut state court and found just this effect. A Market Test for Race Discrimination in Bail Setting, 46 Stanford Law Review 987 (1994).

After controlling for eleven variables relating to the severity of the alleged offenses, we found that judges set bail amounts for black male defendants that were 35 percent higher than those set for their white male counterparts. But the bond dealers turned around and undid a substantial proportion of the disparity.

[B]ond dealers charged black male defendants rates that were almost 19 percent lower than the rates charged to white male defendants…Our results showing significantly lower bond rates (alongside a traditional regression showing significantly higher bail amounts for black defendants in our sample) constitute powerful market evidence of unjustified racial discrimination in bail setting. The market evidence indicates that judges in setting bail demanded lower probabilities of flight from minority defendants. Judges could have reduced bail amounts for minority males without incurring flight risks higher than those deemed acceptable for white male defendants.

For all its faults, competition among bond dealers in at least one market may be responsible for mitigating more than half of the effects of racially disparate bail setting. Bond dealers are routinely criticized for usurping “decisions that ought to be made by the justice system.” But usurping the power of judges who unconsciously discriminate might actually be a hidden advantage of the American system.


misterb

A question I have that's not directly economic is:
Is the poor reputation of bail bondsmen in part because they will use extra-legal methods to protect their investment? So while the lower bond rates may mitigate economic discrimination, the increased threat of violence against flight risks increases the political discrimination.
Ultimately, it's the judges who need to get their act in order.

James C

"But higher bonds can still deter flight even when defendants pay a non-refundable fee. If Levitt and Dubner both use bond dealers, Levitt is less likely to flee because he knows that a bond dealer will rationally search harder to protect $50,000 than to protect $5,000."

Well, if economists are arrested, yes. But defendants are rarely analytical enough to draw the logical conclusion. If a family member puts up real property as collateral, that might serve as a greater deterrent, but generally speaking, I agree that the defendant just sees it as sunk cost.

Andrew

I don't have personal experience with the bail bond industry, but I always thought that the fee was a flat 10%. I've also heard judges on TV shows set bail at "x, or 1/10x cash equivalent." What's that all about?

sara

oh great, regression, that makes me so confident. and why should we assume that the ENORMOUS assumptions of the linear model apply here for any reasons?

NK

Have you (or anyone else) done any post-hoc testing of the efficiency of the bail bond market as a predictor for flight? Data from successful bail bond operations would go far in suggesting the appropriate amount of bail to create a (say) 99% chance of non-flight.

Sean Cook

As someone in the industry I can tell you that Bondsmen do not make up their fees. Fees are typicaly 10% with some variations dependig on the state. There are no 4% bonds anywhere. Those advrtised rates are usually a "down payment".

If Bondsmen were permitted to charge whatever they wanted that would undermine the very job the judge is doing by setting bail in the first place. Bail is used as incentive for a defendant to appear in court, or incentive to a cosigner to guarantee the defendant appears in court.

The State and The Department of Insurance in each State is the licensig entity that determines how much Bondsmen charge for their fees.

Great Post!

jonathan

Great post.

Judges don't operate in a vacuum so if we assume the judges understand the bail bonds business (which the judges I've known do) then this is an overall pricing mechanism in which the system operates together. That is, the judges understand the prices will be lower so they set higher bonds. Are the prices lower for black males and higher for white males because they're based on ability to pay? If so, then judges may be rationally responding to the overall pricing. Judges might well prefer to set higher bonds for white males but then the pricing for those is higher. In other words, maybe the judges are setting prices toward the maximum they know will be charged and that then has a racial effect.

Stephen M (Ethesis)

What bail bondsmen actually represent is the privatizing of the governmental function of making sure that people don't flee and that they show up for their docket calls.

What has been interesting is experiments in other methods to obtain the same result.

GM

Fantastic post.

world traveler

I see three variables that interact as a function of wealth (which may also correlate with race and class).

1. Bail as a percentage of wealth. A higher bail would be needed to impress the importance of returning to court on the wealthy. A low bail on a poor person (exceeding his net worth) would effectively keep him in jail. However...

2. The wealthy would have the resources to flee. Assuming the crime is serious enough that the system would search, the poor person is much more likely to be in one of a few easy to guess spots.

3. Impulse to flee would also be governed by information that only the accused would know. Guilt. Combined with confidence in the system. A guilty rich person may have faith in his expensive attorneys and the innocent poor person may have no faith in the public defender.

If I were doing bail bonds all three would be included in my pricing. The fact I can use force to protect my investment wouldn't mitigate the risk much for a person who is violent and probably guilty.

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madeleine

What's the correlation between organized crime and legalized bounty hunting (aka bondsmen)? Regardless of how efficient it is at getting people into court, or the racial impact - is it worth it if its just the job that hitmen look for in the classifieds to keep their hand in? I'd have thought that the crime gangs were the most adept at tracking people down and making them turn up - so in a market it would make sense but I don't think its a very nice policy to have. I would rather we tracked down all the bondsmen who had broken into houses or intimidated people and locked THEM up.

Ryan Scott

As the owner of a Bail Bond Agency I can tell you that we are one of the most important aspects of the criminal justice system.

The Bail Bond industry is designed to protect public safety. Without it, prisoners would have to be released on their own recognizance with no supervision. This WOULD almost certainly have a negative impact on the public's safety. We would also have a severe jail overcrowding problem with far-reaching consequences in the macro and micro-economies of our nation.

"When bail is given, the principal is regarded as delivered to the custody of his sureties." (US Supreme Court - Taylor vs. Taintor) Meaning, he is in the Bondmans custody and "Whenever they choose to do so, they may seize him and deliver him up in their discharge; and if that cannot be done at once, they may imprison him until it can be done."

So breaking and entering someone's house in an effort to remand them to custody in order to protect the public is a very real part of this business. However, the Recovery Agents (Bounty Hunters is an outdated term) are licensed with the Criminal Justice Training Commission, background screened and licensed with the local jurisdiction and must pass several tests with the Department of licensing in the state as well as the Department of Insurance. In addition, law enforcement is almost always notified and often present during these "forced entry" situations.

Certain television shows and the media in general likes to portray us as unprofessional or criminal organizations which couldn't be farther from the truth. Its probably easier to become a police officer than it is to become a Bondsman or Fugitive Recovery Agent these days.

If you want to think about life without Bail Bonds, imagine releasing 66% of inmates in every jail in the U.S. or building 66% more jails. Either scenario is a nightmare...

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Bad Boys Bail Bonds

It's all about collection in the industry. I don't think they just want to become racists based on color but the race is perhaps a coincidence!

Bad Boys Bail Bonds San Diego
1168 Union St, Ste 101
San Diego, CA 92101, USA
(619) 345-8888 Phone

Bill Marx, Sr.

I note that the date on this article is rather old, Jan. 2008, however, I wanted to comment anyway....

You cannot vary the premium rate in Virginia... Code says 10%... period, if a bondsman charges a rate lower than 10%, they are breaking the law. I have been a licensed Virginia bondsman for over 13 years and I will tell you that I can't afford to take a chance on 'cutting' a bond premium. As to the discrimination deal... I could care less what color or race someone is.... they are all grey in my book... the only deciding factors involved in my decision to bond.... are financial and the 'flee' factor. The premium is set at 10% and the only other factor relates to the possible 'collateral' I may or may not require based on the persons finances and physical location... example being, out of state bonds usually require some sort of collateral for security, but it is never a race issue.... period.

I think your date is flawed. You probably are correct however in your assessment of attorney and court attitudes toward bondsmen in general and that is something that unfortunately needs to be fixed. Please note that there are many very reputable members of the bonding community, TV and the media often portray our industry in a bad light based on the worst scenarios and not the best. Most of the professional I associate with have very good reputations and work very diligently to uphold the highest standards.

I might mention in passing that records indicate a fair number of rather unscrupulous attorneys and even judges... the door swings both ways...

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