Transcript
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Cold Open
It's a little known fact that there's only two countries on Earth where getting out of jail is run by private bail companies. The United States... and the Philippines. True story. Look it up.
Everybody else took one look at this and said, no thanks. In England, you make a deal to cover somebody's bail for them? That's a crime. Over here? That's a little storefront across from the courthouse with a phone number you can remember when you're scared.
So how does a guy make a living off the worst night of your life? I'm gonna tell you. Nobody asked. I'm gonna tell you anyway.
The Deal
So here's how it works. Judge says your bail is fifty grand. You don't have fifty grand. Nobody has fifty grand. So you go see a guy. And the guy says, gimme five thousand. Ten percent, that's the usual. And he tells the court, if this guy runs, I'm good for the whole fifty.
Now, here's the part nobody ever thinks about. You show up to court. Every date. You do everything right. Charges get dropped. Case closed. You know how much of that five grand you get back?
Zero.
That wasn't a deposit. That was his fee. One California contract says the fee is fully earned the second the bond gets filed. Your case gets thrown out the next morning? Doesn't matter. Guy made five thousand bucks for signing a piece of paper.
Now, say you're the other guy. Same charge, same judge, but you've got the fifty grand. You put it up yourself, you show up, and as a general rule, you get it back. So the guy with money pays nothing, and the guy without money pays five thousand dollars. For being innocent.
And this isn't pocket change. In Maryland, over five years, families paid more than two hundred and fifty million dollars in these fees. More than seventy-five million of that was in cases that ended with no finding that anybody did anything wrong.
The Bigger Guy
Now, you're thinking, wait a minute. Your guy's got fifty grand just sitting around? For every customer? In that little office?
No! He doesn't have fifty grand either! Nobody has fifty grand!
What he gives the court is a promise. And behind that promise, there's usually a bigger guy. An insurance company. That's why they call your fee a premium. You thought you were paying for bail. You were buying an insurance policy. And you, my friend, are the thing being insured against.
And it's a small club. Fewer than ten insurance companies back most of the roughly fourteen billion dollars in bail bonds written in this country every year. That mom and pop shop with the faded sign might be working with a company tied to some giant global outfit you've never heard of.
So let's follow your five grand. Deals vary, but here's how the ACLU, who are not exactly big fans, lay it out. About ten percent of the fee goes to the insurance company. That's five hundred bucks. Usually another ten percent goes in a reserve account, in case anything goes wrong. Another five hundred. The rest stays with the shop, and that has to cover the rent, the staff and the guy who answers the phone at three in the morning.
Add it all up, and they figure this business pulls in somewhere between one point four and two point four billion dollars a year. Nobody knows exactly, because nobody's gotta tell you.
The Best Insurance Business In America
Now here's my favorite part. You know what a car insurance company does with your money? It pays claims. Car and home insurers can lose forty to sixty percent of their revenue to claims. That's the whole business. Somebody hits your Buick, they gotta pay.
Somebody looked at thirty-two of these bail insurance companies, one year, 2012. You know how much they paid out in bail losses?
Less than one percent.
Less than one percent! You could run that business from a phone booth!
How do they pull that off? Easy. The insurance company makes the guy sign a paper saying he covers the losses. One contract says he takes all the liability, and he pays it back with interest.
And the guy? The guy makes somebody else sign a paper. You know who? Your mother.
She's called the cosigner. She promises that if you skip, she's good for the whole fifty. And a lot of times, the guy wants collateral too. Her car. Her house. So follow it down. The insurance company's covered by the guy. The guy's covered by your mother. And your mother is covered by you showing up on a Tuesday.
Can't come up with the five grand at all? No problem! The guy's got a payment plan. There was a kid in Maryland, eighteen years old, first arrest ever. His family couldn't pay it all up front, so they went on installments. The charges got dropped weeks later. Dropped! Eight years after that, the Baltimore paper reported he owed more than the day he signed.
With A Truck
But what if you do run? Well, now he owes fifty grand. Which is why the guy... knows a guy. With a truck.
Bounty hunters. Oh, that's real. In 1872, the United States Supreme Court heard a case and basically said that when somebody bails you out, they've got you on a string. They can chase you into another state. They can grab you on a Sunday. If they have to, they can break into your house. States have put a lot of limits on that since, so please, don't try this at home. But that's where it comes from. Eighteen seventy-two.
So you skip court, and the guy pays up right away, right?
Come on.
In thirty-eight states, he gets a grace period. In California, it's a hundred and eighty days. That's six months to go find you. And even when the time runs out, somebody's gotta collect. In Texas, reporters found bail companies owed Dallas County over thirty-five million dollars, some of it going back decades.
And here's the kicker about the guy with the truck. In Salt Lake County, in 2015, nine hundred twenty-eight people on these bonds missed court. You know how many the bail guys brought back? Thirteen percent. The other eighty-seven? Regular cops. You already pay for those.
In Fairness
Now, I'm a fair guy. Everybody says so. Nobody's ever said so, but they should.
Two economists studied thousands of felony cases. People out on these bonds were about twenty-eight percent less likely to miss court than similar people let go on just a promise. And if they did run, they were more likely to get caught. So when your mother's house is on the line, turns out you find your way to the courthouse.
Plus, think about what the guy's really selling. It's three in the morning. You got a job in five hours. You got kids. If you sit in that cell for two weeks, you could lose all of it, and nobody's even proved you did anything. Who picks up the phone? Not the judge. The guy picks up the phone.
That's the whole business right there. It's a terrible deal. And for a lot of people, it's the best deal in the building.
Where This Came From
So who thought of this? San Francisco, the 1890s. Two brothers, the McDonoughs, running a saloon. Their old man had been a police sergeant. Lawyers drank there, and the lawyers had clients stuck in jail. So the brothers started putting up the bail, for a fee.
They're usually credited with starting the first real bail bond business in America. And the founder turned out just how you'd hope. Pete McDonough did eight months for bootlegging. And in 1937, an official report on police corruption in San Francisco called him the fountainhead of corruption. Which I think would look terrific on a business card.
Where It's Going
Now it's starting to change. Four states have outlawed this business altogether. Kentucky, Oregon, Wisconsin and Illinois. And in 2023, Illinois went further and got rid of cash bail, period. First state ever to do it. Everywhere else, the sign's still lit.
So next time you drive past one of those little offices by the courthouse, now you know what you're looking at. It's not a bank. It's not a charity. It's an insurance policy on you, paid for by you, backed by your mother, where the insurance company almost never pays.
Next time, I'll tell you how a pawn shop really makes its money. You didn't ask about that either.
Anyway. It's a little known fact. Now you know. You're welcome.