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 Arkansas law lets a bail-bond company (or the company's owner) own a stake in a separate company that finances bail-bond premiums, and whether the bail-bond company can accept a financed premium.
The AG's answer has two parts. First, a bondsman or bond company cannot personally finance the premium. The bondsman statutes (A.C.A. § 17-19-105(7) and (9)) bar the bondsman from giving anything of value to the principal and from accepting anything of value beyond the premium itself or property used as collateral. Direct financing flunks both prongs because the loan is something of value going to the principal and the interest is something of value coming back from the principal.
Second, the bondsman or bond company is allowed to hold a passive ownership interest in a separate premium-finance company, so long as the bondsman does not operate that company. A premium-finance company is a different legal entity, so when it makes the loan, it (not the bondsman) is the one giving and receiving things of value. But the bondsman cannot personally book loans or accept interest payments while wearing the bondsman hat.
A bail-bond company is also free to accept a premium that has already been financed by a third party. The opinion finds no Arkansas law that prohibits this.
The opinion was triggered by the Protect Arkansas Act of 2023, which amended A.C.A. § 17-19-301(a) to set premium amounts. The AG notes that § 17-19-301(a) does not address financing. The financing rules come from a different set of bondsman statutes that the Act did not change.
What this means for you
Bail bondsmen and bail-bond companies
If you are running a bail-bond shop, do not extend credit directly to clients for the premium. The bondsman statutes treat that as giving something of value to the principal, even if it is structured as a loan, and as accepting something of value beyond the premium when the principal pays interest back. That is a license-bar issue.
You may invest in or own a finance company that is set up as a separate entity (LLC, partnership, corporation) and that handles consumer lending on its own books. The line the AG draws is operational: ownership is fine, running the lending business is not. Hire a manager who is not a bondsman, or set the company up so that licensed bondsmen are passive investors. Do not personally originate loans, sign loan documents on the finance company's behalf, or physically receive interest payments while acting as a bondsman.
If a client comes to you with a premium that someone else has financed, you can accept it. The opinion finds no statutory bar.
Watch the consumer lending side. Premium financing falls under federal Truth-In-Lending Act disclosure rules and under Arkansas's Deceptive Trade Practices Act. The AG cites Bryant v. R & A Investment as a warning about high-interest, deceptive consumer lending. A finance company tied to bondsmen will draw scrutiny.
Defendants and families paying for bail
You may run into bail-bond shops where the same owners also operate a separate finance company. Ask for the financing terms in writing before you sign. Federal Truth-In-Lending requires written disclosure of total fees, interest rates, and all costs. State law also bars misleading or deceptive lending practices. If something feels off, the Arkansas AG investigates illegal lending practices under A.C.A. § 4-88-107.
Arkansas attorneys advising bail-bond clients
The opinion creates a workable but narrow path: indirect financing through a separately incorporated finance company is permitted, direct financing is not. When advising a bondsman client, structure the entities cleanly, document who actually runs the finance company, and keep the bondsman's hands off loan origination. The AG flags federal compliance (Truth-In-Lending) and state deceptive-practices law as parallel risks.
Common questions
Why can a bondsman own a finance company but not run it?
Arkansas treats a corporation, LLC, or partnership as a separate legal entity from its owners. The statutes that ban a bondsman from giving or receiving things of value apply to the bondsman personally, not to a separate company in which the bondsman happens to hold equity. But the bondsman cannot use the entity as a workaround by personally doing the lending, because then it is the bondsman, not the entity, doing the giving and receiving.
Can the bail-bond company refer clients to its owners' finance company?
The opinion does not directly answer this. It is a sensitive area because the act of referral, combined with common ownership, may attract Truth-In-Lending and deceptive-practices scrutiny. Talk to counsel before structuring referrals.
Does this apply to credit cards?
The opinion is about premium financing, not method of payment. Accepting a credit card payment for the premium is not the same as financing the premium.
What did the Protect Arkansas Act change?
Act 659 of 2023, § 238, amended A.C.A. § 17-19-301(a) to set the premium amount a bondsman can earn from each bond. It did not change the bondsman conduct rules in A.C.A. § 17-19-105 or the licensing rules in A.C.A. § 17-19-201 or 17-19-202. Those underlying rules still control the financing question.
What if the bondsman is also the only "bondsman owner" required for the bond company to be licensed?
The opinion notes that a bond company must have at least one licensed bondsman owner who has been licensed for two of the last three years (A.C.A. § 17-19-202(c)(1)(B)). Every owner who "engages in bail bond business" must be licensed (A.C.A. § 17-19-201(a)). Soliciting and issuing bonds counts as engaging in the business; clerical, stenographic, investigative, or administrative work does not (so long as compensation is not contingent on the number of bonds written). That distinction matters for whether other owners need licenses.
Background and statutory framework
The bondsman conduct rules. A.C.A. § 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." Section 17-19-105(9) prohibits both from accepting "anything of value from a principal," with two exceptions: the premium for the bail bond and property used as collateral (which must be returned on final termination of liability on the bond).
The licensing rules. A.C.A. § 17-19-202(c)(1)(B) requires at least one licensed bondsman owner with two years of licensure during the last three years. A.C.A. § 17-19-201(a) requires every owner who "engages in bail bond business" to be licensed; § 17-19-201(e) defines that activity narrowly to soliciting and issuing bonds.
Premium amount. A.C.A. § 17-19-301(a)(2)(A) requires the principal to pay the full premium for the bail bond before release. The Protect Arkansas Act of 2023 (Act 659, § 238) amended this provision but did not address financing.
Separate-entity doctrine. A.C.A. § 4-46-201(a) ("A partnership is an entity distinct from its partners.") and corporate law principles cited in K.C. Properties of N.W. Ark., Inc. v. Lowell Inv. Partners, LLC, 373 Ark. 14, 280 S.W.3d 1 (2008) (Arkansas Supreme Court), 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," support the AG's reasoning that ownership of a finance company is distinct from operating one.
Federal overlay. The Truth-In-Lending Act, 15 U.S.C. §§ 1601–1667f, and CFPB regulations at 12 C.F.R. §§ 1026.17–1026.18 and 1026.24, govern disclosure and advertising of consumer credit, including premium financing.
State consumer-protection overlay. A.C.A. § 4-88-107(a)(1) and (a)(10) prohibit misleading or deceptive advertising by lenders. Subsection 4-88-107(d) gives the AG authority to investigate. State ex rel. Bryant v. R & A Investment Co., 336 Ark. 289, 985 S.W.2d 299 (1999) (Arkansas Supreme Court), confirmed the AG can enforce the Deceptive Trade Practices Act against unconscionable lending practices in a title-pawn case involving a 304% APR.
Citations
- A.C.A. § 17-19-105(7), (9) (bondsman conduct rules)
- A.C.A. § 17-19-201(a), (e) (licensing requirement and "engages in bail bond business" definition)
- A.C.A. § 17-19-202(c)(1)(B) (licensed-owner requirement for bond company)
- A.C.A. § 17-19-301(a) (premium amount; amended by Protect Arkansas Act, Act 659 of 2023, § 238)
- A.C.A. § 4-46-201(a), § 4-46-307(c) (partnership separate-entity rules)
- A.C.A. § 4-88-107 (deceptive trade practices, AG enforcement)
- 15 U.S.C. §§ 1601–1667f (Truth-In-Lending Act)
- 12 C.F.R. §§ 1026.17–1026.18, 1026.24 (TILA disclosure regulations)
- State ex rel. Bryant v. R & A Inv. Co., 336 Ark. 289, 985 S.W.2d 299 (1999)
- K.C. Properties of N.W. Ark., Inc. v. Lowell Inv. Partners, LLC, 373 Ark. 14, 280 S.W.3d 1 (2008)
Source
Original opinion text
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. You ask the following two questions:
- Does Arkansas law allow a bail-bond company or its owner to own an interest in a company that finances premiums?
- 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. 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.
Further, consumer lending is a highly regulated industry. While I cannot opine on federal law, I note that the Consumer Financial Protection Bureau regulates financing of premiums based on the Truth-In-Lending Act. Under that law, lenders must provide consumers with written notice of the total costs of fees and interest rates for the loans. That law also protects consumers from misleading or deceptive advertising by lenders.
Similarly, Arkansas law prohibits misleading or deceptive advertising by lenders. To protect Arkansas consumers, this office has been charged with investigating allegations of illegal, fraudulent, or deceptive practices by lenders. 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."
Question 1: Does Arkansas law allow a BBC or its owner to own an interest in a company that finances premiums?
- 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. 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. A person "engage[s] in bail bond business" 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."
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. Thus, they are prohibited from directly financing premiums because that would be accepting a thing of value, that is, interest payments.
- 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. 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.
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