In Bbbb Bonding Corp. v. Caldwell, No. A162453, 2021 Cal. App. LEXIS 1100, at *2-4 (Ct. App. Dec. 29, 2021), the Court of Appeal found that bail bond premium financing agreements are “consumer credit contracts”.
This appeal requires us to interpret a long-standing consumer protection statute in a novel context: whether the requirement under Civil Code section 1799.91 that notice be afforded to cosigners of consumer credit contracts about the risks of guaranteeing such an agreement applies to bail bond premium financing agreements. We conclude that it does. In this putative class action, the trial court enjoined appellant BBBB Bonding Corporation, doing business as Bad Boys Bail Bonds (BBBB), from enforcing bail bond premium financing agreements entered into by respondent Kiara Caldwell and other similarly situated persons who had cosigned on behalf of an arrestee without having first been provided with this statutory notice. BBBB asserts that this consumer protection law has never applied to bail bond agents or to bail bond premium contracts before. BBBB raises many substantive and procedural challenges to the trial court’s preliminary injunction, arguing primarily that because the Legislature adopted a comprehensive scheme to regulate the conduct of bail bond licensees, it intended to exclude from such transactions the consumer protections applicable to consumer credit contracts. We hold that a bail bond premium financing agreement between a cosigner and the bail bond agent is a consumer credit contract subject to the notice provision of section 1799.91 and related statutory protections. No statute or regulatory provision supports BBBB’s claim that the legal regime governing bail bond licensees was intended to operate as the exclusive source of law for the bail bond industry. Nor is BBBB able to identify any licensee provision that stands in conflict with the cosigner notice requirement. While we appreciate that this decision may upend business expectations for bail bond agents, we cannot accept BBBB’s urging that the injunction should apply only on a prospective basis. To do so would deprive respondent and other cosigners who never received statutory warning of the risks of cosigning a bail bond premium financing agreement of the protections the consumer credit laws were designed to address. We reject BBBB’s other challenges to the issuance of the preliminary injunction and affirm.
The impact of this decision could apply the panoply of consumer protection laws that incorporate the “consumer credit contract” definition to the bail bond industry, and the Court of Appeal noted it:
But BBBB cannot plausibly suggest that compliance with its licensing obligations somehow exempts it from compliance with other statutes such as the UCL (Bus. & Prof. Code § 17200 et seq.), the Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788 et seq.), or other legal requirements. . .Section 1799.90, subdivision (a) defines a “‘Consumer credit contract'” as an obligation “to pay money on a deferred payment basis” where the subject matter of the contract is “primarily for personal, family or household purposes” and the obligation falls within any of six general categories. (See ante, at p. 7.) We are concerned here with the fourth type of consumer credit obligation: “Loans or extensions of credit secured by other than real property, or unsecured, for use primarily for personal, family or household purposes.” (§ 1799.90, subd. (a)(4).) We conclude the Premium Agreement qualifies as an “extension of credit” under section 1799.90, subdivision (a)(4). Section 1799.90, subdivision (a)(4) does not define the term “extension of credit,” but its meaning can be readily discerned by a commonsense understanding of its component words. Black’s Law Dictionary defines “credit” as “[t]he time that a seller gives the buyer to make the payment that is due.” (Black’s Law Dictionary (11th ed. 2019) at p. 463.) To “extend” means “to make available.” (Merriam-Webster’s Collegiate Dictionary (11th ed. 2009) p. 442.) Under a plain reading of section 1799.90, subdivision (a)(4), a bail premium financing agreement is an “extension of credit” because it is an agreement by which the bail agent makes available to the consumer the ability to satisfy his or her obligation to pay the bail bond premium amount over a series of monthly installments. As amici curiae the Attorney General observes, “[t]his plain language interpretation is consistent with definitions in other statutes governing consumer transactions.” For example, the Credit Services Act of 1984 (§ 1789.10 et seq.) defines an extension of credit as “the right to defer payment of debt or to incur debt and defer its payment, offered or granted primarily for personal, family, or household purposes.” (§ 1789.12, subd. (d).) Similarly, the Truth in Lending Act (TILA; 15 U.S.C. § 1601 et seq.) was enacted by Congress [*21] to regulate credit disclosures among “various financial institutions and other firms engaged in the extension of consumer credit.'” (Thompson v. 10,000 RV Sales, Inc. (2005) 130 Cal.App.4th 950, 965, quoting 15 U.S.C. § 1601(a).) TILA defines “‘credit'” as “the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.” (15 U.S.C. § 1602(f).) Thus, Caldwell’s Premium Agreement with BBBB qualifies as a consumer credit contract because Caldwell signed an agreement (1) “to pay money on a deferred payment basis”; (2) the subject matter of the contract was “primarily for personal, family or household purposes”; (3) the obligation involved an “extension[] of credit” because Caldwell was allowed to satisfy her bail premium obligation over a series of monthly payments; and (4) Caldwell’s obligation was “secured by other than real property, or unsecured.” (§ 1799.90, subd. (a)(4).) BBBB does not dispute that the contracts signed by Caldwell and her declarants were primarily for personal, family, or household purposes. Rather, BBBB contends that Caldwell was not a party to a “consumer credit contract” but was instead “the indemnifier of the surety issuing the bond.” BBBB reasons that in bail bond transactions, “the bail agent pays no money to the court that imposed the bond on behalf of the person requesting the bond.” Instead, “the agent collects a premium from the person requesting a bond, and in return secures the promise of a surety company . . . to pay the bail amount in the future” if the arrestee fails to appear and the court declares the bond to be forfeited. BBBB adds that the terms used in the section 1799.91 notice provision are “incompatible with bail-bond agreements” because the notice refers to a “‘cosigner’ who is being asked to ‘guarantee’ a debt ‘[i]f the borrower doesn’t pay.'” Such terms have no application here, BBB contends, because “a bail-bond agreement consists of a promise to pay by the bail agent acting as a surety. In exchange, the arrestee has no obligation to pay the bail or debt, but only to appear in court.” BBBB’s arguments confuse the contract at issue in this appeal. While an arrestee or indemnitor may contract with the surety to guarantee the full amount of the bail if the defendant fails to appear in court as ordered (see People v. The North River Ins. Co., supra, 48 Cal.App.5th at p. 235), the contract we are concerned with here is a different one. A bail premium financing agreement extends credit to cosigners who are unable to afford the bail bond premium by accepting an initial downpayment and allowing them to pay the balance of the premium in monthly installments. This financing agreement is ancillary to the bail bond transaction. Defendants who have financial means will have no occasion to execute such an agreement when obtaining a bail bond because they can pay the full premium outright. And, unlike the indemnity agreement between a defendant and the surety company (here North River), the premium financing agreement is between the arrestee (or cosigner) and the bail bond agent, here BBBB. In short, the premium financing agreement does not “indemnify the surety issuing the bond,” as BBBB contends. Rather, the subject Premium Agreements allowed the cosigner to satisfy his or her obligation to pay the bail bond premium over a series of monthly payments. Thus, the transaction comports with the ordinary understanding of a consumer credit contract involving an “extension[] of credit” under section 1799.90, subdivision (a)(4).