Section 28.1 is renumbered as Section 28.2, and new Section 28.1 provides definitions applicable to Part 28.

Section 28.2 (formerly Section 28.1) prohibits pre-arrest agreements.

Section 28.3 is added to require, and set forth the procedures for, the appointment of bail agents by insurers and charitable bail organizations (“CBOs”).

Section 28.4 is added to prohibit a bail agent from using an unauthorized name.

Section 28.5 is added to set forth bail agent notification requirements.

Section 28.6 is added to set forth requirements regarding bail agent offices.

Section 28.7 is added to prohibit payments of compensation to unlicensed bail agents by insurers and CBOs.

Section 28.8 is added to prohibit a bail agent or insurer from obtaining any fee or consideration other than a premium based on rates in effect and the actual documented out-of-pocket costs of the apprehension and surrender of the principal following a court-ordered warrant; the apprehension and surrender of the principal following the documented request of the indemnitor; and the application for the remission of forfeiture. It also prohibits an insurer, bail agent, or an employee or other representative of an insurer from knowingly deviating from the filed rates and sets forth the duration of a bail bond.

Section 28.9 is added to set forth requirements regarding return of premiums.

Section 28.10 is added to require and define the prompt release of the principal.

Section 28.11 is added to set forth requirements and procedures regarding collateral.

Section 28.12 is added to require a bail agent to use separate accounts for premium and collateral.

Section 28.13 is added to prohibit a bail agent from using any contract or form that has not been approved by the Superintendent of Financial Services (“Superintendent”) pursuant to 11 NYCRR section 66.1.

Section 28.14 is added to set forth requirements regarding the supervision of bail agents by insurers and CBOs.

Section 28.15 is added to set forth requirements regarding the termination of appointments of bail agents by insurers and CBOs.

Section 28.16 (formerly Section 28.2(a)) is amended to impose new requirements regarding bail registers.

Section 28.17 (formerly Section 28.2(b) and (c)) is amended to impose new requirements regarding receipts, records and written statements to be provided to indemnitors and principals.

Section 28.18 is added to require a statement of rights.

Section 28.19 is added to include requirements regarding a bail agent’s maintenance and retention of records.

Section 28.20 is added to set forth requirements regarding surrender of a principal.

Section 33(c) is amended by revising the definition of “managing general agent” to include certain bail agents.

Section 66.0 is amended by adding a new subdivision (f) to explain why DFS is requiring that bail bond forms be filed with and approved by the Superintendent.

Section 66.1(a) is amended to require bail bond forms to be filed and approved by the Superintendent.

Section 66.1(b) is added to require an insurer and CBO to file with the Superintendent for the Superintendent’s approval any contract or form to be signed by or provided to an indemnitor or principal in connection with the issuance of a bail bond or depositing money or property as bail, and to use only such approved contracts and forms.

1. Statutory authority: Financial Services Law (“FSL”) §§ 202 and 302 and Insurance Law (“IL”) §§ 301, 2307, 2314, and Article 68.

FSL § 202 establishes the office of the Superintendent of Financial Services (“Superintendent”). FSL § 302 and Insurance Law § 301, in material part, authorize the Superintendent to effectuate any power accorded to the Superintendent by the FSL, IL, or any other law, and to prescribe regulations interpreting the IL.

IL § 2307(b) prohibits a policy form from being delivered or issued for delivery unless it has been filed with the Superintendent and either the Superintendent has approved it or 30 days has elapsed and the Superintendent has not disapproved it as misleading or violative of public policy. However, § 2307(c) permits the Superintendent, by regulation, to waive the policy form prior approval requirements if the rates for that insurance are not subject to prior approval under IL § 2305(a).

IL § 2314 prohibits an authorized insurer and any employee or other representative of an authorized insurer from knowingly charging or demanding a rate or receiving a premium that departs from the rates, rating plans, classifications, schedules, rules and standards in effect on behalf of the insurer and from issuing or making any policy or contract involving a violation thereof.

IL Article 68 sets forth provisions governing the licensing of bail agents and the doing of a bail business by an insurer and charitable bail organization (“CBO”).

2. Legislative objectives: The providing of bail is an integral part of the criminal justice system in New York State and the Legislature has long been concerned with abuses in providing bail bonds. The Legislature has strictly regulated who may deposit money as bail or execute as surety any bail bond. IL Article 68 provides the statutory requirements applicable to the regulation of bail insurers, CBOs, and bail agents. 11 NYCRR 28 (Insurance Regulation 42), which was first promulgated in 1964, implements the Legislative intent in regulating the business and posting of bail as a vocation in New York. IL § 2307 requires a policy form to be filed with the Superintendent unless the Superintendent waives the prior approval requirement by regulation and IL § 2314 prohibits an authorized insurer and any employee or other representative of an authorized insurer from knowingly deviating from the filed rate.

The amendments accord with the public policy objectives of more effectively regulating the bail industry and protecting consumers that the Legislature sought to advance in IL §§ 2307 and 2314 and Article 68 by: amending 11 NYCRR 28, which implements IL Article 68, and 11 NYCRR 33 (Insurance Regulation 120), which governs managing general agents, to establish similar provisions and requirements that are applicable to other insurance producers; amending 11 NYCRR 66 (Insurance Regulation 76) to require that bail bond forms be filed with the Superintendent for prior approval; and establishing requirements to prevent abuses that are particular to bail.

3. Needs and benefits: Since 2005, there has been an increase in the number of complaints made to the Department of Financial Services (“DFS”) against licensed bail agents, including allegations of misuse of collateral pledged with bail agents, the charging of impermissible fees, fraud, and the illegal retention of premium. For example, DFS received a complaint alleging, among other things, that a bail agent refused to return over $30,000 in premium that an indemnitor had paid for a bail bond to secure the release of a principal after the court rejected the bond at a bail sufficiency hearing and the principal was not released from custody. While handling that complaint, DFS learned that the U.S. Circuit Court of Appeals for the Second Circuit had certified the following question to the New York Court of Appeals involving the IL and analogous facts to those at issue in the DFS complaint: “Whether an entity engaged in the ‘bail business,’ as defined in NYIL § 6804(a)(1), may retain its ‘premium or compensation,’ where a bond posted pursuant to NYCPL § 520.20 is denied at a bail sufficiency hearing conducted pursuant to NYCPL § 520.30, and the criminal defendant that is the subject of the bond is never admitted to bail.”

In June 2017, the New York Court of Appeals issued its opinion in Gevorkyan v. Judelson, 29 N.Y.3d 452 (2017), in which DFS filed an amicus curiae brief. According to the Court’s analysis of the statute, and as argued in DFS’s amicus brief, an insurer is entitled to the premium only upon “giving bail bond” under IL § 6804(a), and the bail bond “has not been given if the court refuses to accept the bond after the bail source hearing.” Id. at 458. The Court noted that its determination was further supported by the IL principle that premium follows risk: “The question before us ultimately turns on when a ‘premium’ is earned.” Id. at 461. As the Court explained, “[t]he use of the word ‘premium’ in section 6804(a) is significant because that term connotes a consideration paid to an insurer for assuming a risk. Risk, when used “with reference to insurance, describes the liability assumed as specified on the face of the policy.” (Emphasis in original.) Id. In the Court’s view, the insurer does not incur risk if the criminal defendant is not released and has no opportunity to abscond. “If the court disapproves the bail bond, the surety never runs the risk it contracted to insure.” Id. at 462. On August 29, 2017, DFS issued Insurance Circular Letter No. 13 (2017) to advise insurers and licensed bail agents that they must strictly comply with the Gevorkyan decision.

In August 2017, in light of the Gevorkyan case, DFS sent a letter to insurers writing bail bonds asking for information related to various aspects of their bail business in New York State, including complaints received by the insurer regarding its or its bail agents’ failure to return premiums or fees after the principal was not released from custody; copies of the insurers’ most recent versions of all forms provided to indemnitors and principals in New York State; and written guidelines and manuals that the insurer provides to bail agents that discuss earning and retention of premium and collateral.

DFS also met with advocates and learned that bail agents are not posting their names and licenses in their offices, making it difficult for indemnitors to know who they are dealing with and whether that person is properly licensed as a bail agent. Advocates also noted that bail agents are requiring indemnitors to sign contracts whereby they agree to pay impermissible fees for things such as missed phone calls, couriers, and notaries; are not providing indemnitors and principals with copies of agreements they signed; are making it difficult to obtain return of collateral or are not returning collateral; and are taking advantage of indemnitors who may be undocumented persons by asking them for more money.

In June 2018, DFS sent a letter to licensed bail agents asking them to submit information about themselves and how they operate their businesses, including a description of how premium and collateral are received and maintained; a list of fees that they charge other than bail bond premium; and the circumstances under which they would rearrest or return a principal to custody.

Furthermore, DFS, with the Department of State and the Division of Criminal Justice Services, held listening sessions in New York City, Buffalo, and Syracuse in June 2018 to gather input from communities, advocates, and licensees concerning practices and how to combat abuses in the bail industry.

After reviewing testimony and comments from the listening sessions, considering complaints and surveying other states’ bail laws and regulations, DFS drafted amendments that would correct deficiencies and clarify certain issues. The amendments would require, among other things: a bail agent to maintain a bail register; a bail agent to issue a receipt upon collecting and, if applicable, returning the premium and collateral; an insurer, CBO, and bail agent to be liable for the return of all collateral received; an insurer and CBO to file, for the Superintendent’s approval, all contracts and other forms that are signed by or provided to the indemnitor or principal; a bail agent to prominently display in a headquarters location and each satellite office the license of the bail agent and any supervising person responsible for the place of business and a sign that states that a complaint may be filed with DFS; and a bail agent to provide certain disclosures to a potential indemnitor before the indemnitor signs any agreement. The amendments also codify the Gevorkyan decision that the full premium paid for a bail bond must be returned if the principal is not released from custody.

The amendments also would include in the definition of “managing general agent” under 11 NYCRR 33 any person or business entity that supervises or manages, on behalf of an insurer, bail agents appointed by the insurer, other than a person who is a full-time employee or officer of the insurer.

On September 5, 2018, DFS published the proposed amendments in the State Register and received extensive comments from insurers, bail agents, consumer advocates, and individual New York residents. DFS reviewed the comments and made changes to the proposed amendments in response thereto.

4. Costs: Insurers, CBOs, and bail agents will incur costs to implement and continue compliance with the amendments because they will need to make filings with DFS, issue receipts, expend printing and copying costs for written disclosures made available by DFS, and keep additional detailed records. These costs may vary based upon the size of the regulated entity and thus DFS cannot currently estimate the costs. The filing of policy forms and contracts by insurers should not be significant because insurers already make rate filings with DFS and provide forms to their bail agents. Many of the recordkeeping and other requirements in the proposed amendments are identical to requirements applicable to insurance producers.

These amendments may impose compliance costs on DFS because DFS will need to review contracts and policy forms submitted to DFS for approval. However, any additional costs incurred by DFS should be limited since there are not many insurers writing bail bonds and the terms of the bonds should generally be the same. As such, the costs to DFS should be minimal and DFS expects to absorb the costs in its ordinary budget.

The amendments do not impose compliance costs on local governments.

5. Local government mandates: This rule does not impose any program, service, duty, or responsibility upon a county, city, town, village, school district, fire district, or other special district.

6. Paperwork: The amendments will require insurers and CBOs to make filings with DFS and will require bail agents to issue receipts, provide written disclosures, and keep additional detailed records.

7. Duplication: This rule does not duplicate, overlap, or conflict with any existing state or federal rules or other legal requirements.

8. Alternatives: DFS considered requiring collateral to be maintained in an interest-bearing account in a financial institution located in New York State that is insured by the Federal Deposit Insurance Corporation or National Credit Union Administration but determined that such a requirement was unnecessary.

DFS further considered requiring that build-up funds be held in a trust account but removed that section of the rule in response to comments it received from the bail industry.

DFS also considered maintaining the exemption for an insurer from filing bail bond forms with the DFS for DFS’s approval but decide to remove that exemption to better protect consumers because bail agents are using forms that often include language and terms that impose unreasonable, punitive, or predatory conditions on principals and indemnitors.

9. Federal standards: The rule does not exceed any minimum standards of the federal government for the same or similar subject areas.

10. Compliance schedule: An insurer, CBO, and bail agent must comply with the rule within 120 days after publication of the notice of adoption in the State Register.

1. Effect of rule: These amendments to the regulations apply to insurers in New York State that are authorized to write bail bonds; certified charitable bail organizations (“CBOs”); and bail agents.

Although most insurers are not small businesses, industry has asserted previously that certain insurers subject to the regulations are small businesses but has not provided the Department of Financial Services (“DFS”) with specific insurers or the number of such entities.

There are approximately 282 licensed bail agents in New York State, individual, corporate or otherwise. Although DFS does not have any specific statistics, DFS believes that many, if not most, of those bail agents are independently owned and operated and employ 100 or fewer individuals, Therefore, they are small businesses under the definition in State Administrative Procedure Act (“SAPA”) § 102(8).

There are nine certified CBOs currently in New York State. All of these CBOs are not-for-profit entities. DFS does not have information regarding their size but believes that most, if not all, are small businesses under SAPA § 102(8).

These amendments do not apply to local governments.

2. Compliance requirements: The amendments will require insurers and CBOs that are small businesses, to make filings with DFS and will require bail agents that are small businesses to issue receipts, provide written disclosures, and keep additional detailed records.

No local government will have to undertake any reporting, recordkeeping, or other affirmative acts to comply with the amendments because they do not apply to a local government.

3. Professional services: It is not anticipated that any small business affected by these amendments will need to retain professional services, such as lawyers or auditors, to comply with the amendments. No local government will need professional services to comply with these amendments because they do not apply to any local government.

4. Compliance costs: Insurers, CBOs, and bail agents that are small businesses will incur costs for the implementation and continued compliance with the amendments because they will need to make filings with DFS, issue receipts, expend printing and copying costs for written disclosures made available by DFS, and keep additional detailed records. These costs may vary based upon the size of the regulated entity and thus DFS cannot currently estimate the costs. The filing of policy and other forms for insurers or certain forms for CBOs should not be significant. Insurers already make rate filings and provide forms to their appointed bail agents. Many of the recordkeeping and other requirements for bail agents in the proposed amendments are identical to those requirements applicable to insurance producers.

No local government will incur any costs to comply with these amendments because they do not apply to any local government.

5. Economic and technological feasibility: No insurer, CBO, or bail agent that is a small business affected by these amendments should experience any economic or technological impact because of the amendments. These amendments not apply to any local government; therefore, no local government should experience any economic or technological impact as a result of the amendments.

6. Minimizing adverse impact: There will not be an adverse impact on a local government since these amendments to the regulations do not apply to a local government. There may be an adverse impact on insurers, CBOs, and bail agents that may be small businesses but any adverse impact should be minimal. DFS considered the approaches suggested in SAPA § 202-b(1) for minimizing adverse impacts but did not find them applicable and concluded that the consumer protections afforded by these amendments are critical.

7. Small business and local government participation: DFS, with the Department of State and the Division of Criminal Justice Services, held listening sessions in New York City, Buffalo, and Syracuse in June 2018 to gather input from communities, advocates, and licensees concerning practices and how to combat abuses in the bail industry.

After reviewing testimony and comments from the listening sessions it received, considering complaints, and surveying other states’ bail laws and regulations, DFS drafted amendments that would correct deficiencies and clarify certain issues.

On September 5, 2018, DFS published the proposed amendments in the State Register and posted the proposed amendments on DFS’ website. DFS received extensive comments from insurers and bail agents that are small businesses and made changes to the proposed amendments in response thereto.

These amendments do not impose any additional burden on persons located in rural areas, and will not have an adverse impact on rural areas.

The amendments would amend 11 NYCRR 28 (Insurance Regulation 42)to require, among other things: a bail agent to maintain a bail register; a bail agent to issue a receipt upon collecting and, if applicable, returning the premium and collateral from the indemnitor; an insurer, charitable bail organization (“CBO”), and bail agent to be liable for the return of all collateral received; a bail agent to prominently display in a headquarters location and each satellite office the license of the bail agent and any supervising person responsible for the place of business and a sign that states that a complaint may be filed with the Department of Financial Services; and a bail agent to provide certain disclosures to a potential indemnitor before the indemnitor signs any agreement. The amendments also codify the holding of Gevorkyan v. Judelson, 29 N.Y.3d 452 (2017), that the full premium paid for a bail bond must be returned if the principal is not released from custody.

The amendments further would include in the definition of “managing general agent” under 11 NYCRR 33 (Insurance Regulation 120)any person or business entity that supervises or manages, on behalf of an insurer, bail agents appointed by the insurer, other than a person who is a full-time employee or officer of the insurer and would amend 11 NYCRR 66 (Insurance Regulation 76) to require bail bond insurers and CBOs to file, for the Superintendent’s approval, all contracts and other forms that are signed by or provided to the indemnitor or principal, including the bail bond form.

These amendments apply uniformly to regulated parties that do business in both rural and non-rural areas of New York State. The amendments will not impose any additional costs on rural areas.

The proposed amendments should have no negative impact on jobs or employment opportunities in this State. The amendments would amend 11 NYCRR 28 (Insurance Regulation 42) to require, among other things: a bail agent to maintain a bail register; a bail agent to issue a receipt upon collecting and, if applicable, returning the premium and collateral; an insurer, charitable bail organization (“CBO”), and bail agent to be liable for the return of all collateral received; a bail agent to prominently display in a headquarters location and each satellite office the license of the bail agent and any supervising person responsible for the place of business and a sign that states that a complaint may be filed with the Department of Financial Services; and a bail agent to provide certain disclosures to a potential indemnitor before the indemnitor signs any agreement. The amendments also codify Gevorkyan v. Judelson, 29 NY 3d 452 (2017), which held that the full premium paid for a bail bond must be returned if the principal is not released from custody.

The amendments further would include in the definition of “managing general agent” under 11 NYCRR 33 (Insurance Regulation 120) any person or business entity that supervises or manages, on behalf of an insurer, bail agents appointed by the insurer, other than a person who is a full-time employee or officer of the insurer and would amend 11 NYCRR 66 (Insurance Regulation 76) to require insurers and CBOs to file, for the Superintendent of Financial Services’ approval, all contracts and other forms that are signed by or provided to the indemnitor or principal, including the bail bond form.

These amendments, intended to make the bail process more transparent and provide greater consumer protection, will not have a substantial adverse impact on jobs and employment opportunities in New York State.

In response to the publication of the proposed rule in the New York State Register, the New York State Department of Financial Services (“DFS”) received comments from an association of bail agents; an association of bail insurers; an insurer authorized to write fidelity and surety insurance; a New York City agency; a New York City elected official; a coalition of advocate organizations; a racial justice organization; and individual New York consumers (collectively, “interested parties”).

Interested parties submitted a number of comments, including comments that: the New York City Administrative Code (the “code”) requirements pertaining to bail agents do not entirely align with the rule and that DFS should either “carve-out” New York City bail agents from the rule, substitute compliance with the code for compliance with the rule, or amend the rule to match the code; DFS should allow bail agents to charge fees for services in addition to premium and offer payment plans; the rule should allow bail agents to make pre-arrest arrangements for bail and allow a single indemnitor to contract for bail for multiple defendants; the rule should require bail agents to report less frequently to courts and DFS changes in contact information; objected to reporting misconduct of bail agent employees and self-reporting criminal matters; DFS amend the rule to recognize that the duration of the bail bond ends at exoneration; the rule permit a bail agent to retain the bond premium if the principal remains incarcerated on another matter or warrant; sought clarification of the insurers’ obligation to return premium; sought clarification as to who is responsible for the costs associated with a bail source hearing; sought clarification as to the time period for return of premium; expressed concerns with the build-up fund section; the rule should require bail agents to post a bond within 12 hours following the execution of a contract or the receipt of premium or collateral and require bail agents to return 25% of both premium and collateral for every 24-hour period following the execution of the contract or the receipt of any premium or collateral without release; DFS clarify that collateral be returned only if there has not been a forfeiture or remission of forfeiture; sought clarification as to when the insurer is liable for the return of collateral; requested clarification of what is meant reasonable collateral and how a bail agent and insurer are supposed to hold collateral jointly; the rule should permit bail agents to deduct from collateral to be returned any expenses, unpaid premium, losses or fees; opposed requiring that a bail agent assist the indemnitor with obtaining exoneration because courts upstate may be further away than they are in the New York metro area; questioned how collateral is valued and who pays for determining value; the rule require that an insurer be required to return collateral 60 days from the date of notice of the bail agent’s failure to return collateral; the rule permit a bail agent to receive compensation for the cost of a remission motion; the rule should exempt a bail agent from maintaining a premium account if premiums were remitted to the insurer within 14 days; it is cumbersome for a bail agent to maintain records of premium and collateral; objected to filing bail and indemnity forms with DFS for approval; DFS should include more specificity regarding restrictions and terms in bail bond contracts; requested clarification about the scope of an insurer’s obligation to supervise bail agents; the rule should require insurers to create a restitution fund for consumers; opposed requiring an insurer to disclose to DFS the basis for terminating a bail agent’s appointment absent a violation of a specific regulation; the receipt the bail agent issues when the indemnitor pays the premium and collateral and the receipt the bail agent issues when the bail agent returns the premium and collateral should have matching numbers; objected to including information in a receipt or statement of rights that would be included in the bail or indemnity agreements; the rule should require a nonresident bail agent to make available records in New York State within ten business days upon request rather than ten calendar days; objected to bail agents having to provide notice to consumers that they can make a complaint to DFS; objected to timing bail agent record retention to return of collateral because the collateral may never be picked up by the indemnitor; asked if bail forms may be customized and if the bail agent may use electronic signatures; stated that the rule is inadequate and relies too heavily on adding disclosures, rather than limiting abusive terms and that it fails to shift power dynamics and ensure justice; opposed DFS oversight of surrenders; state that reporting of surrenders is insufficient and DFS should place explicit limits on surrenders, review and track all notified surrenders, and impose fines and restitution for bail agents improperly incarcerating principals; stated that the use of bail contracts and forms approved by DFS is welcome; DFS should make certain information public and searchable, including information about consumer complaints and enforcement actions against bail agents, bail bond forms and the contact information for insurers that issue bail bonds; requested annual reporting on the number of violations issued to bail agents, monetary penalties associated with those violations, number of licenses revoked and suspended, and number of consumer complaints and the disposition of those complaints; asked DFS to ensure that disclosure requirements do not limit a consumer’s ability to bring a lawsuit against a bail agent or insurer; requested there be at least annual meetings between DFS, advocates, community members, and the bail industry to discuss the practical effects of the rule; requested that the rule restrict a bail agent’s misuse of consumer information and explicitly restrict abusive solicitation practices and payments for referrals.

DFS amended the rule in response to comments it received. DFS has posted on its website a complete assessment of the public comments that it received regarding the rule.