Can an Arkansas bail bondsman or bail-bond company finance the premium for a defendant's bail bond, or own a piece of a company that does?

Plain-English summary

Senator Alan Clark asked whether a bail-bond company or its owner may own an interest in a business that finances bail premiums, and whether a bail-bond company may accept a financed premium. The Attorney General answered yes to both, with a limit: a bail bondsman or bond company cannot itself make the premium loan. A bondsman may own an interest in a separate finance company only if the bondsman is not involved in operating it.

Arkansas law prohibits a bondsman or bond company from giving a principal “anything of value” or receiving anything of value from a principal beyond the bond premium or permitted collateral. The opinion treats a direct premium loan as value given and its interest payments as value received. A separate finance company, by contrast, makes the loan and receives interest in its own name. The bondsman cannot personally establish those loans or physically receive the interest payments.

The Attorney General found no law prohibiting a bond company from accepting a premium financed by someone else. He also said A.C.A. § 17-19-301(a) sets the premium amount but does not itself address financing. Footnote 3 adds that subdivision 17-19-301(a)(2)(A) requires the principal to pay the full premium before release. That payment rule is present in the official PDF even though it was missing from the earlier stored text.

The opinion separately notes that lending is regulated. It describes federal Truth-In-Lending disclosures, Arkansas rules against misleading or deceptive lender advertising, and the Attorney General's authority to investigate illegal or deceptive lending practices. It expressly says the office cannot opine on federal law here.

What this means for you

Bail bondsmen and bond-company owners

Keep lending operations separate from licensed bond work. The opinion permits an ownership interest in a separate premium-finance business while saying a bondsman may not personally establish its loans or accept its interest payments. An ownership interest alone does not answer whether the person is participating in the finance company's operations.

People paying a bond premium

A third-party loan does not, by itself, prevent a bond company from accepting the financed premium. The opinion also notes the full-premium payment requirement before release and describes written federal loan-cost disclosures. Review the financing terms, fees, and interest before agreeing to the loan.

Common questions

Can the bondsman lend the premium directly?

No. The Attorney General says a direct loan would violate the prohibitions on giving value to the principal and receiving value beyond the premium or collateral.

Can a bondsman own a separate finance company?

Yes, according to the opinion, if the bondsman is not involved in its operation. It specifically says the bondsman could not personally establish a loan or physically accept the interest payments.

Can a bond company accept a premium financed by a third party?

Yes. The Attorney General says he found no law prohibiting a bond company from accepting a financed premium.

Does the premium statute require payment before release?

Yes. Footnote 3 says A.C.A. § 17-19-301(a)(2)(A) requires the principal to pay the full premium before release. The opinion distinguishes that payment rule from the question of who may finance the premium.

Currency note

This opinion was issued May 28, 2024. Check current bond and lending law before relying on its treatment of a particular financing arrangement.

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

TIM GRIFFIN
ATTORNEY GENERAL

Opinion No. 2024-025

May 28, 2024

The Honorable Alan Clark
State Senator
Post Office Box 211
Lonsdale, Arkansas 78087

Dear Senator Clark:

I am writing in response to your request for my opinion about financing bail-bond premiums (“premiums”) after the recent amendment of A.C.A. § 17-19-301(a) by the Protect Arkansas Act. 1 You ask the following two questions: 2

1. Does Arkansas law allow a bail-bond company or its owner to own an interest in a company that finances premiums?

2. Does Arkansas law allow a bail-bond company to accept a financed premium?

RESPONSE

Subsection 17-19-301(a) does not specifically address financing of premiums. Instead, that provision sets the amount—a premium—a bail bondsman or bail-bond company can earn from each bail bond that is issued. 3 As discussed below, other bail-bondsmen statutes govern the financing of premiums. Under those statutes, bail bondsmen and bail-bond companies cannot themselves finance premiums. They may, however, own an interest in a premium-financing company if they are not involved in the operation of the company.

1
Act 659 of 2023, § 238.
2
I have paraphrased and rearranged your questions for clarity.
3
Subdivision 17-19-301(a)(2)(A) requires the principal to pay the full premium for the bail bond in before release.

323 CENTER STREET, SUITE 200
LITTLE ROCK, ARKANSAS 72201

The Honorable Alan Clark
State Senator
Opinion No. 2024-025
Page 2

Further, consumer lending is a highly regulated industry. 4 While I cannot opine on federal law, 5 I note that the Consumer Financial Protection Bureau regulates financing of premiums based on the Truth-In-Lending Act. 6 Under that law, lenders must provide consumers with written notice of the total costs of fees and interest rates for the loans. 7 That law also protects consumers from misleading or deceptive advertising by lenders. 8

Similarly, Arkansas law prohibits misleading or deceptive advertising by lenders. 9 To protect Arkansas consumers, this office has been charged with investigating allegations of illegal, fraudulent, or deceptive practices by lenders. 10 And the Arkansas Supreme Court has agreed that this office may “enforce the provisions of the [Deceptive Trade Practices Act] for unconscionable business practices involving usurious contracts.” 11

Question 1: Does Arkansas law allow a BBC or its owner to own an interest in a company that finances premiums?

1. Direct financing prohibited. Arkansas law requires a bail-bond company to have at least one
   owner who has been licensed as a bail bondsman through the Arkansas Professional Bail Bondsman Licensing Board for at least two years during the last three years. 12 Although one licensed owner is all that is required for the bail-bond company to be licensed, every owner who “engage[s] in bail bond business” must be licensed. 13 A person “engage[s] in bail bond business”14

4
The Consumer Financial Protection Bureau provides a comprehensive list of all its regulations at https://www. consumerfinance.gov/rules-policy/final-rules/code-federal-regulations/. 5 The opinion function of this office does not ordinarily extend to questions of federal law, except to the degree those questions are incorporated into state law or govern the conduct of public officials. Ark. Att’y Gen. Ops. 2023-070, 2010-036, 2009-089. 6 15 U.S.C. §§ 1601–1667f.
7
12 C.F.R. §§ 1026.17–1026.18.
8
Id. § 1026.24.
9
A.C.A. § 4-88-107(a)(1), (a)(10).
10
Id. § 4-88-107(d)(4), (d)(5), (d)(6).
11
State ex rel. Bryant v. R & A Inv. Co., 336 Ark. 289, 293, 985 S.W.2d 299, 301 (1999) (title-pawn business advertised loans for borrowers with “Bad Credit” and “No Credit,” charged monthly interest payments equal to 25% of the loan, charged an annual percentage rate of 304.17%, and required customers to sign powers of attorney so that their collateral could be sold upon default). 12 A.C.A. § 17-19-202(c)(1)(B).
13
Id. § 17-19-201(a).
14
Id.

The Honorable Alan Clark
State Senator
Opinion No. 2024-025
Page 3

by soliciting and issuing bail bonds, which is distinct from performing “clerical, stenographic, investigative, or other administrative duties” when compensation for those duties is not “contingent upon the number of bonds written.” 15

Section 17-19-105(7) prohibits both bail-bond companies and bail bondsmen from paying, rebating, giving, or promising “anything of value to the principal or anyone in his or her behalf.” So they are prohibited from directly financing premiums because that would be giving something of value—that is, a loan—to the principal or someone acting on the principal’s behalf.

Similarly, A.C.A. § 17-19-105(9) prohibits both bail-bond companies and bail bondsmen from accepting “anything of value from a principal,” except either the premium for the bail bond or property that is used as collateral for the bail. 16 Thus, they are prohibited from directly financing premiums because that would be accepting a thing of value—that is, interest payments. 17

2. Indirect financing permitted. Importantly, there are no statutes or rules that prohibit a
   bail-bond company or bail bondsman from owning an interest in a business that finances premiums. If a bail-bond company or bail bondsman owns an interest in a company that finances premiums, the finance company is a separate legal entity from the bail-bond company or bail bondsman. 18 And the finance company—not the bail-bond company or bail bondsman—would be giving the loan to the principle or someone acting on the principal’s behalf. And the finance company—not the bail-bond company or bail bondsman—would be accepting the interest payments from the principal.

There are also no statutes or rules that prohibit a bail-bond company or bail bondsman from benefiting from a business that finances premiums. Because the finance company is the entity that accepts interest payments from the principal, it would be difficult to determine whether the bail-bond company or bail bondsman even received that benefit.

But under A.C.A. §§ 17-19-105(7) and -105(9), a bail bondsman cannot operate a company that finances premiums. In other words, a bail bondsman could not personally establish a loan or physically accept the interest payments. The bail-bondsman license still operates as a bar to these activities.

15
Id. § 17-19-201(e).
16
The property that is used as collateral must be returned “upon final termination of liability on the bond.” Id.
§ 17-19-105(9).
17
Id.
18
E.g., A.C.A. § 4-46-201(a) (“A partnership is an entity distinct from its partners.”); K.C. Properties of N.W. Ark., Inc. v. Lowell Inv. Partners, LLC, 373 Ark. 14, 32, 280 S.W.3d 1, 15 (2008) (in a case involving piercing the corporate veil of limited liability companies, explaining the “nearly universal rule that a corporation and its stockholders are separate and distinct entities, even though a stockholder may own the majority of the stock”); see also A.C.A.
§ 4-46-307(c) (“A judgment against a partnership is not by itself a judgment against a partner. A judgment against a partnership may not be satisfied from a partner’s assets unless there is also a judgment against the partner.”)

The Honorable Alan Clark
State Senator
Opinion No. 2024-025
Page 4

Question 2: Does Arkansas law allow a bail-bond company to accept a financed premium?

Yes. I have not found any law that prohibits a bail-bond company from accepting a premium that has been financed.

Assistant Attorney General Jodie Keener prepared this opinion, which I hereby approve.

Sincerely,

TIM GRIFFIN
Attorney General